Home office expenses for the self-employed: what you can claim

As more people choose to work from home, self-employed business owners often ask whether they can claim home office expenses on their tax return.

What’s the golden rule when it comes to business expenses?

The general HMRC rule is that you can only claim expenses that are wholly and exclusively for your business.

If a cost is partly personal and partly business (known as ‘dual purpose’), you must be able to who how you split the costs if requested.

That’s especially important when it comes to working from home.

You’re likely to share heating, broadband, and electricity between your personal life and your business, so any claims must be based on a fair and reasonable method.

Keep notes of how you worked it out, and avoid rounding up or guessing.

Two ways to claim home office expenses

As a sole trader, there are two main approaches:

1. Claim a proportion of your household costs

This method allows you to claim a portion of your actual running costs, such as electricity, rent, mortgage interest, broadband, and council tax, based on the percentage of your home used for business and the frequency of use.

There’s no single correct method, but many people divide their bills based on the number of rooms or the square footage used for work. Then they reduce it further based on how many hours per week the room is used for business.

You can find examples and more guidance in BIM47820.

Example: If your home has five rooms and you use 1 room for business, that’s 1/5 of your household costs. If you work in that room for 40 hours a week out of 168 hours, your business share is 40/168. So if your annual electricity bill is £1,000, your allowable claim would be: £1,000 × 1/5 × 40/168 = around £48.

Please keep a copy of your calculations, as well as the original bills and receipts, in case HMRC requests them.

2. Use HMRC’s simplified flat rate

If you’d rather avoid the admin, you can use HMRC’s simplified expenses method instead.

This gives you a flat monthly amount based on how many hours you work from home:

This is often the easiest option if your household bills are relatively low, or if you prefer not to deal with detailed calculations.

You don’t need to keep receipts, but you should be able to demonstrate the typical number of hours you work from home.

Find out more in our guide to simplified expenses.

Flat rate vs proportion: which is better?

If your bills are modest or your work hours vary, the flat rate can be simpler and not far off the result of a careful proportion.

If your bills are high or you use a dedicated space for long hours, the proportion method can yield a higher return.

For very small side hustles, consider whether the trading allowance is a more suitable option. If your total business income is within the allowance, claiming it can be simpler than itemising expenses.

What you can’t claim

• The whole of your household bills. Only the fair business portion is allowable.
• Mortgage capital repayments. Only the interest element can be apportioned.
• General household furniture used personally. Only items bought wholly and exclusively for business may qualify.
• Everyday meals at home. Subsistence rules differ when travelling for work.
• Broadband or phone in full if there is personal use. Only claim a reasonable business share – see how this works.

Can you claim part of your mortgage or rent?

If you work from home as a sole trader, you can’t deduct your whole mortgage or rent payments, but you can claim a portion of your mortgage interest or rent that relates to business use.

The percentage you claim must be based on your actual use of the space and time spent working.

You can’t claim for mortgage capital repayments, only the interest portion. If you rent your property, you may be able to claim a fair share of the rent in the same way.

Could it affect Capital Gains Tax when you sell?

Possibly – but only in specific situations.

If you have a room in your home that is used only for business purposes, and never for anything else, then that part of your home may lose its Private Residence Relief.

This means you could face a small Capital Gains Tax bill on part of your profit if you later sell the property.

However, if you use your home office for both personal and business purposes – or if you occasionally use the space for something else – the whole property usually remains exempt.

You can find more on this in CG64660.

What about insurance and mortgage conditions?

In most cases, running a business from home doesn’t cause problems with your mortgage, rental agreement or insurance – especially if you’re working from a laptop in a spare room.

That said, it’s wise to let your insurer or mortgage provider know that you work from home, so that you’re not caught out later by any small print.

You may also need to update your cover if clients visit your home, or if you store business stock or equipment.

See our guide to sole trader insurance.

Do you have to pay business rates?

Not usually. If you have a room in your home that you use for both business and personal reasons, such as a dining room that doubles as a workspace, your local council is unlikely to treat it as a business premises.

But if you’ve created a completely separate space that’s used only for business (like a converted garage or dedicated outbuilding), and it’s not part of your personal living space, the council may decide to apply business rates.

This doesn’t happen often, but it’s something to consider before making permanent changes.

Keep it sensible and stay within the rules

It’s essential only to claim what you’re genuinely entitled to. If HMRC ever asks questions, you’ll need to show that your claim is reasonable and that you’ve based it on accurate figures.

That means keeping good records – bills, receipts, and the notes you used to work out your claim.

Small claims aren’t likely to trigger an enquiry, but it’s still wise to get advice if you’re unsure. A good accountant can help you understand where the line is and how to stay on the right side of it.

What if you work through a limited company?

If you’re set up as a limited company, the rules are different.

You may not be able to claim household expenses directly, and most directors either use a £6 per week flat rate or draw up a rental agreement with their company, both of which require careful attention and proper documentation.

For a full breakdown, see this separate guide:
What expenses can a limited company claim for?