Home office expenses guide
Complete guide to claiming home office costs for sole traders and limited companies: simplified expenses versus actual costs method.
Quick answer
If you work from home, you can claim home office costs via simplified expenses (flat rate based on hours worked: £10-£26 per month) or actual costs (proportion of mortgage interest, utilities, council tax based on floor area). Simplified expenses are easier but may give a lower deduction. Choose whichever method gives you the higher claim. You can switch methods between tax years.1
Two methods for claiming home office costs
HMRC offers two ways to claim home office expenses: simplified expenses (flat-rate based on hours worked) and actual costs (apportioned based on floor area).1 You choose one method per tax year. You cannot mix them.
Simplified expenses
The flat-rate scheme pays monthly amounts based on hours worked from home:1
- 25 to 50 hours per month: £10 per month (£120 per year)
- 51 to 100 hours per month: £18 per month (£216 per year)
- 101+ hours per month: £26 per month (£312 per year)
No receipts required. No apportionment calculations. You just count your hours and apply the rate. This method is best if you work part-time from home, have low household costs, or want minimal admin.
Actual costs
Calculate the business-use proportion of your home (office floor area divided by total floor area). Apply that percentage to allowable costs:1
- Mortgage interest (not capital repayments) or rent
- Utilities (gas, electricity, water)
- Council tax
- Internet and phone line rental
- Buildings insurance
- Home maintenance and repairs
Example: office is 12 sq m, total home is 80 sq m. That's 15%. Annual allowable costs are £9,000. You claim £1,350 (15% of £9,000).
This method is best if you work full-time from home, have high mortgage interest or rent, or have a large dedicated office space.
What you can and cannot claim
Via actual costs, you can claim:1
- Mortgage interest (not capital repayments)
- Rent (if you rent your home)
- Utilities proportional to business use
- Council tax proportional to business use
- Internet and phone (business proportion)
- Buildings insurance
- Repairs and maintenance (business proportion)
You cannot claim:
- Mortgage capital repayments (only interest is allowable)
- Furniture and equipment (these are capital allowances, not home office costs)
- Full utility costs if using simplified expenses (already included)
Capital Gains Tax implications
If you claim actual costs for a room used exclusively for business, you may lose part of your Private Residence Relief when you sell your home. This could mean Capital Gains Tax on the proportion used for business.2
Example: you use 15% of your home exclusively for business for 10 years. When you sell, 15% of the gain may be taxable (assuming you've owned the property for 10 years). This can cost thousands.
Simplified expenses do not trigger this issue because HMRC treats them as reimbursement for incidental costs, not exclusive business use.
To avoid CGT issues while using actual costs, do not claim for exclusive business use. Use the room occasionally for personal purposes (e.g., a spare bedroom that doubles as an office). HMRC accepts that rooms with dual use keep full Private Residence Relief.
How to claim
Sole traders
Enter home office costs in the "premises costs" section of your Self Assessment (SA103F). If using simplified expenses, enter the annual flat-rate amount. If using actual costs, enter the apportioned total with a note explaining your calculation.
Limited companies
The company reimburses you for home office costs. If using simplified expenses, pay yourself £26/month (or lower rate depending on hours). If using actual costs, calculate the monthly amount and pay yourself that figure. Keep evidence of the calculation.
The reimbursement is a business expense for the company (reduces Corporation Tax) and is tax-free for you if it's reasonable and evidenced.
Record-keeping
For simplified expenses, keep a note of hours worked each month. A simple spreadsheet showing dates and hours is sufficient.
For actual costs, keep:
- Floor plan or measurement notes showing office and total floor area
- Receipts or bank statements for mortgage interest, utilities, council tax
- Annual summary showing apportionment calculation
Keep records for 5 years after the 31 January Self Assessment deadline.
- Simplified expenses (max rate)
- £26/month (£312/year)
- Mortgage capital deductible
- No (only interest)
- CGT risk with actual costs
- Yes (if exclusive use)