Working From Home Tax Relief: How to Claim
Introduction
If you regularly work from home as a sole trader or freelancer, you can claim tax relief on a portion of your household running costs. HMRC allows you to deduct these expenses from your taxable income, reducing your overall tax bill.
This guide explains the two main methods for claiming working from home expenses: the simplified flat rate and the actual costs method. We cover who can claim, how much you can deduct, and what records you need to keep.
Who Can Claim Working From Home Expenses?
Sole traders and freelancers
If you are self-employed and use part of your home regularly and exclusively for business, you can claim a proportion of your household costs.
When you cannot claim
You cannot claim if:
- You work from home only occasionally
- The space is not used regularly for business
- You have a separate business premises that you use as your main workplace
Method 1: Simplified Expenses (Flat Rate)
How it works
HMRC's simplified expenses scheme lets you claim a flat rate based on the hours you work from home each month. This removes the need to calculate actual costs or keep detailed household bills.
Current flat rates (2025/26 tax year)
| Hours worked from home per month | Flat rate per month |
|---|---|
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101 hours or more | £26 |
Example calculation
If you work from home 30 hours per week (approximately 120 hours per month), you can claim £26 per month.
Annual claim: £26 x 12 = £312
Benefits of the flat rate method
- Simple to calculate
- No need to keep household bills
- Just track your working hours
Limitations
- May give you less relief than actual costs if you have high household expenses
- Cannot be combined with the actual costs method
Method 2: Actual Costs Calculation
How it works
You calculate what proportion of your household running costs relate to business use. This requires more record-keeping but can result in a larger deduction.
Costs you can include
- Electricity
- Gas
- Water rates (if metered)
- Council tax
- Mortgage interest or rent
- Home insurance
- Broadband and phone (business portion)
- Repairs and maintenance to the work area
How to calculate your proportion
You need to determine a fair business-use percentage. Common methods include:
By rooms: If you use 1 room out of 5 in your home solely for business, you could claim 20% of your household costs.
By area: Measure the floor area of your workspace as a percentage of your total home.
By time: If you work from home 40 hours per week out of a 168-hour week, the time-based proportion would be approximately 24%.
HMRC expects you to use a reasonable and consistent method.
Example calculation
- Total annual household costs: £8,000
- Workspace: 1 room out of 5 rooms (20%)
- Business use of that room: 50% of the time
Calculation: £8,000 x 20% x 50% = £800
The £6 Per Week Alternative
What is it?
HMRC also allows employees to claim a flat £6 per week (£312 per year) without needing to provide evidence. While this is primarily for employees, some sole traders find this a useful benchmark when their actual costs are difficult to calculate.
For self-employed individuals, the simplified expenses scheme (described above) is the official equivalent.
Capital Gains Tax Considerations
Potential CGT implications
If you claim actual costs that include mortgage interest or rent, and you use a room exclusively for business, this could affect your Principal Private Residence (PPR) relief when you sell your home.
How to avoid CGT issues
- Use the simplified flat rate method (no CGT implications)
- Ensure no room is used exclusively for business (some personal use protects PPR relief)
- Seek professional advice if you own your home and claim significant actual costs
Record Keeping Requirements
What to keep
- Utility bills and household invoices
- Records of hours worked from home
- Documentation of how you calculated the business proportion
- A diary or log of business use
How long to keep records
Keep all records for at least 5 years after the 31 January filing deadline for the relevant tax year.
How QTax Helps
QTax supports you by:
- Helping you understand which method suits your situation
- Guiding you through the calculation process
- Ensuring your claim is consistent with HMRC rules
- Flagging any inconsistencies before you file
FAQs
Can I switch between flat rate and actual costs each year?
Yes, you can choose a different method each tax year. However, you cannot use both methods in the same year.
What if I only work from home part of the year?
You calculate your claim based only on the months you actually worked from home. For the flat rate, count the hours in each month. For actual costs, pro-rate your annual expenses.
Do I need to tell HMRC which room I use?
No, you do not need to specify a room. But you should keep a note of your calculation method in case HMRC asks.
Can I claim for furniture or equipment?
Furniture and equipment are usually claimed separately as capital allowances or under the Annual Investment Allowance, not as working from home expenses.
Conclusion
Claiming working from home expenses is a straightforward way for sole traders to reduce their tax bill. Whether you choose the simplified flat rate for ease or actual costs for a potentially larger deduction, the key is to keep good records and use a consistent method.
For the 2025/26 tax year, consider which approach gives you the best outcome based on your working hours and household costs.
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