A significant number of sole traders in Ireland run their business entirely or partly from home. Nutritionists seeing patients online. Virtual assistants working from a spare bedroom. Yoga teachers delivering online classes from their sitting room. Illustrators with a home studio. Photographers editing in a converted bedroom.
The list is long, and the tax implication is the same across all of them: if you use part of your home for your business, you are entitled to claim a proportion of your household costs as a business expense. That proportion reduces your taxable profit, which reduces your tax bill.
It sounds simple, and in principle it is. But in practice, most of the sole traders we work with either do not claim home office expenses at all or claim them inconsistently and with less confidence than the rules warrant.
The Governing Principle: Wholly and Exclusively
Revenue’s rule on business expenses is that they must be incurred “wholly and exclusively” for the purposes of your trade. When it comes to home office costs, this might sound like it means you can only claim the costs of a room used only for work, and nothing else. In practice, it is more nuanced than that.
What Revenue expects is that you make a reasonable and proportionate claim based on the actual business use of your home. A spare bedroom that serves as your dedicated office from Monday to Friday, with the laptop closed at weekends, qualifies. The key word is reasonable. Revenue is not expecting perfection; it is expecting honesty and a defensible basis for the proportion you claim.
What Costs Can You Claim?
For a sole trader working from home, the following household costs are allowable on a proportionate basis:
Heating and Electricity
Your gas or oil heating costs and your electricity bill are the main household running costs most people think of first. You can claim the business-use proportion of both. Keep your annual bills or quarterly statements and apply the proportion calculation described below.
Broadband
Most sole traders working from home use their home broadband for business. The business-use proportion of your monthly broadband cost is deductible. If you have a separate business broadband connection, the full cost is deductible.
Rent
If you are renting your home and you use part of it for your business, a proportionate share of your rent is an allowable expense. This is one of the more significant claims available to sole traders renting in Ireland, particularly in cities where rents are high, and it is consistently underclaimed.
Mortgage Interest
If you own your home, the mortgage interest element (not the capital repayment) can be claimed on a proportional basis. However, and this is important, if you are claiming a room as used exclusively for business, this may affect your entitlement to Capital Gains Tax principal private residence relief when you eventually sell the property. For most people working in a room that has some personal use as well, this is not a practical concern. But if you have any doubt about your specific situation, it is worth raising with a tax adviser before you make the claim. We can arrange a consultation with our tax experts.
Home Insurance
The business-use proportion of your home insurance premium is also claimable, though this is often smaller and less commonly claimed.
What You Cannot Claim
There are some costs that do not qualify. The capital repayment element of your mortgage is not an allowable expense, only the interest element qualifies. Structural improvements to your home are not claimable as revenue expenses. Costs that are entirely personal in nature do not qualify. And you cannot claim the full cost of any bill simply because you work from home. The claim is always proportionate.
How to Calculate the Proportion
There is no single Revenue-mandated calculation method, which is where people often get stuck. The instruction is to use a reasonable basis. Here are the approaches most commonly used:
Room-based calculation
Count the rooms in your home (excluding bathrooms and hallways as a practical matter). If you use one room exclusively as a business workspace, divide one by the total number of rooms. This gives you the proportion of household costs attributable to that room.
For example: a five-room home with one dedicated office gives a fraction of one in five, or 20%. You would claim 20% of your heating and electricity bills as a business expense.
Time-based adjustment for shared spaces
If the room you work in is also used for personal purposes, you need to factor in the proportion of time it is used for business. If you use the room for business roughly 40% of the time, you apply that to the room proportion: one room of five multiplied by 40% gives an 8% claim on relevant bills.
Worked Example
A virtual assistant working full-time from a dedicated home office in a four-room house. Annual heating and electricity bills total €2,400. Monthly broadband is €50 (€600 annually). She rents her home at €1,500 per month (€18,000 annually).
- Home office as a proportion of total rooms: 1/4 = 25%
- Heating and electricity claim: 25% of €2,400 = €600
- Broadband claim (50% business use): 50% of €600 = €300
- Rent claim: 25% of €18,000 = €4,500
Total home office claim in this example: €5,400. At the higher rate of income tax, that claim reduces the tax bill by approximately €2,800. A significant amount worth checking out.
This is a worked example to illustrate the calculation method. Your own figures will depend on your home, your bills, your income level, and your tax rate.
Equipment and Furniture for Your Home Office
Beyond the ongoing running costs, there is also the question of equipment and furniture purchased for your home workspace. A desk, office chair, shelving, or filing system purchased for your home office are allowable business expenses. For items costing a few hundred euro or less, these can generally be claimed in full in the year of purchase. For larger items of capital equipment e.g. a computer, a professional monitor, specialist equipment for your trade, these are claimed through capital allowances at 12.5% per year over eight years. The FastTax.ie system makes it easy for you to keep track of your capital expenses and claim the allowances correctly each year.
The Difference Between the Sole Trader Claim and the Employee e-Worker Relief
It is worth being clear on this because the two are often confused. The e-worker (remote working) relief that gets coverage in the media is for PAYE employees who work from home. It allows employees to claim a proportion of heating, electricity, and broadband costs on a different basis, essentially a flat-rate daily calculation.
As a sole trader, you are not claiming e-worker relief. You are claiming actual business expenses based on the proportionate use of your home for your trade. The calculation method is different, and the potential claim is generally larger because you are claiming the costs as business expenses against your trading profit, rather than as a credit against PAYE tax.
Record-Keeping for Home Office Claims
To support a home office claim, you should retain: annual or quarterly utility bills (gas, electricity); monthly broadband bills; rent receipts or evidence of rent payments; mortgage statements showing the interest element separately; and a note of the number of rooms in your home and the basis of your calculation.
Revenue keeps records for review for up to six years, so you need to retain documentation for that period. Keeping PDFs of your bills in a dedicated folder is entirely sufficient.
Putting It Into Your Form 11
Home office expenses are entered in the expenses section of your Form 11, under general business expenses. When you file through FastTax.ie, our guided tool specifically prompts you on home office costs as part of the expense review. If you are unsure about the proportion to claim or whether a particular cost qualifies, our Plan 2 Plus includes an expert review of your return before submission.
In summary, the portion of your home that serves your business is a business cost, and Revenue’s rules are designed to allow you to claim it. The calculation is straightforward once you understand the method, the record-keeping is minimal, and the saving (as the worked example above shows) can be significant.
If you have never claimed home office expenses before, it is worth looking at the previous four years too. Revenue allows you to make amended returns going back four years, so there may be unclaimed relief available.
For a broader look at what else you can claim as a sole trader, see our post on Tax Deductions Self-Employed Professionals in Ireland Are Missing, or if this is your first year self-employed, check out our Guide to Self-Employed Tax Year One.
