Self-employed individuals working from home can claim tax relief on home office expenses. You can use HMRC's simplified expenses method (flat rates of £10-£26 per month based on hours worked) or calculate actual costs as a proportion of household bills. Both methods reduce your taxable profit and lower your tax bill.
This guide explains both claiming methods, which costs qualify, and how to choose the best option for your situation.
Two Methods for Home Office Claims
HMRC allows self-employed individuals to claim home office expenses using one of two methods:
| Method | How It Works | Best For | |--------|--------------|----------| | Simplified Expenses | Flat rate based on hours worked from home | Most home workers, less paperwork | | Actual Costs | Business proportion of real household bills | Dedicated office, high bills, full-time home working |
You can only use one method per tax year—choose the one that gives the higher deduction.
Method 1: Simplified Expenses
How Simplified Expenses Work
Under simplified expenses, you claim a flat rate per month based on hours worked from home:
| Hours Worked From Home Per Month | Monthly Flat Rate | |---------------------------------|-------------------| | 25 – 50 hours | £10 | | 51 – 100 hours | £18 | | 101+ hours | £26 |
Annual Maximum: £312 (12 months × £26)
This covers the additional costs of working from home: heating, lighting, electricity for equipment, and general wear on your home.
Calculating Your Claim
Track your hours worked from home each month, then apply the appropriate rate.
Example: Sarah (Freelance Designer)
| Month | Hours Worked From Home | Rate | Claim | |-------|------------------------|------|-------| | April | 120 | £26 | £26 | | May | 95 | £18 | £18 | | June | 110 | £26 | £26 | | July | 80 | £18 | £18 | | August | 45 | £10 | £10 | | September | 130 | £26 | £26 | | October | 115 | £26 | £26 | | November | 140 | £26 | £26 | | December | 60 | £18 | £18 | | January | 125 | £26 | £26 | | February | 100 | £18 | £18 | | March | 105 | £26 | £26 | | Total | 1,225 | | £264 |
Sarah claims £264 simplified expenses for the year.
What Simplified Expenses Cover
The flat rate covers:
- Electricity for lighting and equipment
- Heating
- General household costs (insurance, repairs attributed to business use)
Note: Simplified expenses do NOT include phone or internet—claim these separately.
Advantages of Simplified Expenses
- Simple calculation — no need to apportion household bills
- Less paperwork — just track hours, not every utility bill
- HMRC-approved rates — no risk of overclaiming
- Consistent — same rates regardless of actual costs
Disadvantages of Simplified Expenses
- Capped amount — maximum £312/year may be less than actual costs
- Doesn't scale — same rate whether you rent a studio flat or a large house
- Hours requirement — minimum 25 hours/month to claim anything
Method 2: Actual Costs
How Actual Costs Work
Calculate the business proportion of your actual household expenses:
Business proportion = Rooms used for business ÷ Total rooms (or by floor area or time)
Apply this percentage to allowable household costs.
What You Can Claim
| Expense | Claimable? | Notes | |---------|------------|-------| | Mortgage interest | Yes | Only for self-employed (not landlords—different rules) | | Rent | Yes | Business proportion | | Council tax | Yes | Business proportion | | Electricity | Yes | Business proportion | | Gas/heating | Yes | Business proportion | | Water rates | Yes | Business proportion | | Home insurance | Yes | Business proportion | | Repairs to work area | Yes | Proportioned or 100% if dedicated office | | Mortgage capital repayments | No | Not an expense | | Property purchase costs | No | Not an expense | | Food and general living | No | Personal costs |
Calculating Your Proportion
Three common methods to calculate business proportion:
Room Count Method
Business proportion = Number of rooms used for work ÷ Total rooms
Example: You work in 1 room of a 5-room house.
- Business proportion: 1 ÷ 5 = 20%
Exclude bathrooms and kitchens from the count (unless used for business).
Floor Area Method
Business proportion = Office floor area ÷ Total floor area
Example: Your office is 12m² in a 100m² home.
- Business proportion: 12 ÷ 100 = 12%
More accurate if rooms vary significantly in size.
Time Method
If you use a room for both business and personal purposes:
Business proportion = Hours used for business ÷ Hours room is available
Example: You use the spare bedroom as an office 8 hours/day, and it's otherwise used occasionally.
- Business hours: 8 hours × 5 days = 40 hours/week
- Available: 112 waking hours/week (16 hours × 7 days)
- Business proportion: 40 ÷ 112 = 36%
Actual Costs Example
James (IT Consultant, Full-Time Home Worker)
Annual household costs: | Expense | Annual Cost | |---------|-------------| | Mortgage interest | £8,000 | | Council tax | £2,400 | | Electricity | £1,800 | | Gas | £1,200 | | Water | £400 | | Home insurance | £300 | | Total | £14,100 |
Business proportion: 1 office room in a 6-room house = 16.7%
Claimable amount: £14,100 × 16.7% = £2,355
Compare to simplified expenses (if working 120+ hours/month): £26 × 12 = £312
James saves £2,043 more using actual costs.
Advantages of Actual Costs
- Higher claims possible — especially with high household bills
- Scales with your situation — larger home office = larger proportion
- Includes mortgage interest — often the biggest household cost
Disadvantages of Actual Costs
- More paperwork — keep all household bills
- Complex calculation — must justify proportion if queried
- Requires records — need 6 years of supporting documents
- May trigger questions — large claims get scrutinised
Phone and Internet (Both Methods)
Regardless of which home office method you choose, claim phone and internet separately:
Phone Costs
If you use your phone for business:
- Claim the business proportion of your contract
- Estimate business vs personal use (60/40, 70/30, etc.)
- Keep your phone bill as evidence
Example: Phone contract £30/month, 60% business use.
- Claim: £30 × 60% × 12 = £216/year
Internet/Broadband
If you need internet for business:
- Claim the business proportion
- Consider both work hours and personal use
Example: Broadband £40/month, 50% business use.
- Claim: £40 × 50% × 12 = £240/year
Tip: If you have a separate business phone line or broadband solely for work, claim 100%.
Choosing the Right Method
Use Simplified Expenses If:
- You work from home part-time (25-100 hours/month)
- Your household bills are relatively low
- You prefer minimal paperwork
- You don't have a dedicated home office
Use Actual Costs If:
- You work from home full-time
- You have high mortgage interest or rent
- Your home is large or expensive to run
- You have a dedicated room used solely for business
- The calculation gives a higher figure than £312
Compare Both Methods
Before choosing, calculate both:
| Method | Your Calculation | |--------|------------------| | Simplified expenses | Hours worked × rate × 12 months | | Actual costs | Total household costs × business proportion |
Choose whichever is higher. You can switch methods between tax years (but not mid-year).
Record-Keeping Requirements
For Simplified Expenses
Keep a log of:
- Hours worked from home each month
- Total hours per month in each rate band
A simple spreadsheet or diary noting daily hours is sufficient.
For Actual Costs
Keep for 6 years:
- Mortgage statements (showing interest portion)
- Rent receipts/bank statements
- Council tax bills
- Utility bills (electricity, gas, water)
- Home insurance documents
- Calculation of business proportion
- Floor plan or room count documentation
For Phone/Internet
Keep:
- Phone and broadband bills
- Record of how you estimated business proportion
Common Mistakes to Avoid
1. Claiming Both Methods
You cannot claim simplified expenses AND actual costs in the same tax year. Choose one.
2. Including Non-Allowable Costs
Don't claim:
- Mortgage capital repayments (only interest is allowable)
- Food and groceries
- Personal portion of any expense
- Improvements that add value (vs. repairs)
3. Overclaiming Proportion
Your business proportion must be justifiable. If HMRC queries your claim:
- A 50% claim for a small desk in the corner of a living room won't stand up
- A dedicated room you don't use personally is more defensible
4. Forgetting Phone and Internet
These are additional to home office claims. Many self-employed people miss them.
5. Not Recording Hours
For simplified expenses, you need evidence of hours worked. Without records, HMRC may challenge your claim.
Capital Gains Tax Consideration
If you work from home and later sell your property, a portion of the gain may be taxable:
When CGT Applies
- If part of your home is used exclusively for business
- And you claim actual costs based on that exclusive use
Avoiding CGT Issues
- Use simplified expenses (no exclusive use implied)
- Don't designate a room as 100% business-only
- Use the room occasionally for personal purposes
Example: Your "office" is also a guest bedroom occasionally. This mixed use helps avoid CGT on sale.
Consult an accountant before selling if you've claimed significant home office deductions.
Employees Working From Home
Different rules apply if you're an employee (not self-employed):
HMRC Flat Rate (Employees)
Employees can claim £6/week (£312/year) without evidence if required to work from home. This is claimed through:
- Employer adjustment to tax code
- Self Assessment (if you file one)
- P87 form
Required to Work From Home
You must be required by your employer to work from home—not just choosing to. The COVID-19 arrangements ended on 5 April 2022.
Can't Claim Both
If you're employed AND self-employed, claim:
- Employee rate for employed work
- Self-employed method for self-employment
Example: Full Year Calculation
Maria: Part-Time Freelance Writer
Situation:
- Works from home 3 days per week (approximately 72 hours/month)
- 2-bedroom flat, uses spare bedroom as office
- Annual costs: £800 mortgage interest, £1,400 council tax, £900 utilities
Method 1: Simplified Expenses
- 72 hours/month = £18/month rate
- Annual claim: £18 × 12 = £216
Method 2: Actual Costs
- Total costs: £800 + £1,400 + £900 = £3,100
- Business proportion: 1 room ÷ 4 rooms = 25%
- Annual claim: £3,100 × 25% = £775
Plus phone/internet (either method):
- Phone: £25/month × 50% × 12 = £150
- Broadband: £35/month × 40% × 12 = £168
- Additional: £318
Best choice: Actual costs (£775) + phone/internet (£318) = £1,093 total
Tax savings at 20%: £219 | Tax savings at 40%: £437
Claiming Home Office with TaxFolio
TaxFolio automatically handles home office claims:
- Simplified expenses calculator — enter hours, get the correct rate
- Actual costs tracker — categorise household bills and calculate proportion
- Comparison tool — see which method saves more tax
- Phone/internet tracking — separate from home office for correct claiming
- MTD-ready — included in quarterly submissions from April 2026
Start your free 30-day trial and maximise your home office deduction.
Summary: Working From Home Tax Relief
| Aspect | Simplified Expenses | Actual Costs | |--------|--------------------|--------------| | Calculation | Hours × flat rate | Bills × business % | | Maximum claim | £312/year | No maximum | | Paperwork | Hours log only | All household bills | | Includes mortgage interest | No | Yes | | Best for | Part-time home workers | Full-time, high bills |
Both methods are legitimate HMRC-approved ways to reduce your tax bill. Calculate both, choose the higher figure, and keep appropriate records.
Learn more about sole trader expenses and other tax deductions available to self-employed individuals.