Claiming Home Office Expenses
A guide to claiming home office expenses for UK sole traders and limited company directors, including HMRC's flat rate, the actual cost method and record-keeping requirements.
If you work from home – whether full time or part of the week – you can claim a proportion of your household running costs as a business expense. The rules differ depending on whether you are a sole trader or a limited company director, and there are two main methods for calculating the claim.
Two methods for claiming
HMRC offers two approaches:
| Method | How it works | Best for |
|---|---|---|
| Simplified expenses (flat rate) | Fixed weekly amount, no receipts needed | Small claims, less paperwork |
| Actual cost method | Calculate the real proportion of household bills | Larger claims, dedicated home office |
You can choose either method, but once you pick one for a tax year, you generally need to stick with it for that year. Let’s look at each in detail.
Method 1: Simplified expenses (flat rate)
HMRC publishes a flat rate based on the number of hours you work from home each month:
| Hours worked from home per month | Flat rate per month |
|---|---|
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101 or more hours | £26 |
If you work from home full time (say, 160 hours a month), you can claim £26 per month, or £312 per year. No receipts are needed – you just record the number of hours worked.
This method is only available to sole traders and partnerships. It cannot be used by limited companies paying expenses to a director.
The flat rate is simple and risk-free from an HMRC compliance perspective, but the amounts are low. If your actual costs are significantly higher, the second method is worth the extra effort.
Method 2: Actual cost method
With this approach, you calculate the actual proportion of your household costs that relate to business use. This method is available to both sole traders and limited companies.
Which costs qualify?
| Expense | Claimable? |
|---|---|
| Heating and electricity | Yes – business proportion |
| Gas | Yes – business proportion |
| Water rates | Yes – business proportion |
| Council Tax | Yes – business proportion |
| Mortgage interest or rent | Yes – business proportion |
| Home insurance | Yes – business proportion |
| Broadband and phone line | Yes – business proportion |
| Repairs and maintenance to shared areas | Yes – business proportion |
| Repairs to your office room only | Yes – in full |
| Mortgage capital repayments | No |
| Food and household supplies | No |
How to calculate the proportion
The standard approach is to use a room-based calculation. If your home has six rooms (excluding bathrooms, hallways and kitchens) and you use one as a dedicated office, the business proportion is 1/6 of your total costs.
You can refine this further by factoring in time. If you only use the room for business purposes during working hours (say, 40 hours out of a 168-hour week), the calculation becomes:
1/6 x 40/168 = approximately 4% of total household costs
However, if the room is used exclusively for business during working hours and is not a general living space, many accountants use the simpler room-based fraction without the time adjustment. HMRC has accepted this approach in practice, provided the room is genuinely used as an office.
Worked example
| Household expense | Annual cost | Business proportion (1/6) | Claimable amount |
|---|---|---|---|
| Electricity and gas | £2,400 | £400 | £400 |
| Water rates | £500 | £83 | £83 |
| Council Tax | £2,000 | £333 | £333 |
| Broadband | £360 | £60 | £60 |
| Home insurance | £400 | £67 | £67 |
| Rent or mortgage interest | £12,000 | £2,000 | £2,000 |
| Total | £2,943 |
Compare this with the simplified method’s £312 per year. For anyone with a dedicated home office, the actual cost method typically yields a much larger tax deduction .
Limited company directors: how to claim
If you work from home through your own limited company, the company can pay you for the use of your home as a business expense. There are two main routes:
Option 1: HMRC’s flat rate without evidence (£6 per week)
Your company can pay you £6 per week (£26 per month / £312 per year) as a tax-free reimbursement for working from home. No receipts are needed and the payment is a deductible expense for the company.
This rate applies where the company requires you to work from home (not simply because you choose to).
Option 2: Actual costs reimbursed by the company
The company can reimburse you for the actual additional costs of working from home, calculated using the room-based method above. You need to keep evidence of the costs and the calculation.
The reimbursement is:
- Tax-free for you (no Income Tax or NIC)
- Deductible for the company (reduces Corporation Tax liability)
The key requirement is that the costs must represent additional costs incurred because of working from home. HMRC is clear that costs you would have incurred anyway (like Council Tax, which you pay regardless of whether you work from home) can still be claimed on a proportional basis, but you need to be able to justify the business use.
Capital gains tax warning
If you use part of your home exclusively for business, that part may not qualify for Private Residence Relief when you sell the property. This means a portion of any capital gain on the sale could be taxable.
In practice, if the room is also used for private purposes (even occasionally – storing personal items, watching television in the evening), the whole property should still qualify for full Private Residence Relief. Most tax advisers recommend that you do not designate a room as 100% business use for this reason.
| Use of the room | Private Residence Relief impact |
|---|---|
| Mixed use (office by day, personal use in evenings/weekends) | Full relief preserved |
| Exclusive business use | Partial relief lost – proportion of gain taxable |
What records to keep
Whichever method you use, keep these records:
- Utility bills showing total household costs (actual cost method)
- A floor plan or room count supporting your proportion calculation
- A log of hours worked from home (simplified method, or to support the time-based adjustment)
- Board minutes or employment contract confirming the company requires home working (for limited companies)
- Receipts for any office-specific costs (repairs, furniture, equipment)
Keep records for at least six years in case HMRC enquires into your Self Assessment return or your company’s CT600.
Office furniture and equipment
Costs of furnishing your home office are separate from the running costs above. These are treated as capital expenditure and can be claimed through:
- Annual Investment Allowance (for limited companies and sole traders)
- Capital allowances (writing-down allowance if AIA is not available)
Common items include desks, office chairs, monitors, printers and storage. If the item costs under £1,000, many businesses treat it as a revenue expense rather than capital, though strictly it depends on the asset’s useful life.
Employees working from home
If your company has employees who work from home (not just you as a director), the same £6 per week payment can be made to each employee tax-free. For higher amounts, you need a formal arrangement and evidence of actual costs.
Since the shift to hybrid working after 2020, many employers now make this payment as standard. It is a small benefit that costs the company very little after Corporation Tax relief.
Choosing the right method
For most sole traders working from home occasionally, the simplified flat rate is easiest. For limited company directors with a dedicated home office, the actual cost method almost always produces a larger claim. The £6 per week company payment is a good starting point, but calculating actual costs is worth the effort if you work from home regularly.
The difference between claiming £312 and claiming £2,000-£3,000 per year is significant over time, and the record-keeping is not difficult once you have a system in place.