If you run your business from home, the question of whether you can claim home insurance on your taxes comes up regularly. The answer is not a simple yes or no. It depends on your business structure, how you use your home for work, and what type of home insurance you have.

This guide covers the rules for sole traders, limited company directors, and partnerships. We will also look at the difference between standard home insurance and a business use policy, how to calculate the claimable portion, and what HMRC expects you to record.

The Short Answer on Claiming Home Insurance

You cannot claim the full cost of your home insurance against your business profits. You can only claim the portion that relates to business use of your home. For most people, this means a small percentage of the premium.

The logic is straightforward. Your home insurance covers your personal belongings and property. If you use a room as an office for six hours a day, you do not suddenly need to claim 100% of the insurance cost as a business expense. HMRC expects you to apportion the cost fairly.

Sole Traders and Home Insurance Claims

If you are a sole trader or freelancer working from home, you have two options for claiming home-related expenses. The choice affects how you claim home insurance on your taxes.

Option 1: Simplified Expenses (HMRC Flat Rate)

HMRC offers a flat rate for working from home. This is called simplified expenses. It applies to sole traders and partnerships without a limited company structure.

The flat rate is based on the number of hours you work from home each month:

  • 25 to 50 hours per month: £10 per month
  • 51 to 100 hours per month: £18 per month
  • 101 or more hours per month: £26 per month

If you use the flat rate, you cannot separately claim home insurance, mortgage interest, rent, council tax, or utilities. The flat rate covers all of those costs in one figure. It is designed to save you the hassle of calculating apportionments.

For many sole traders, the flat rate is simpler and often gives a reasonable result. But if your home-related business costs are significantly higher, the actual cost method may be better.

Option 2: Actual Cost Method (Apportionment)

Under the actual cost method, you calculate the business proportion of each household expense, including home insurance. You then claim that proportion against your profits.

To work out the business proportion, you need a fair basis of apportionment. HMRC accepts the following approaches:

  • Room count method: Divide your total home insurance premium by the number of rooms in your home. Then multiply by the number of rooms used exclusively or partly for business.
  • Floor area method: Calculate the floor area of your home office as a percentage of your total home floor area. Apply that percentage to your insurance premium.
  • Time and space method: A more detailed calculation that considers both the floor area used and the proportion of time it is used for business.

Let us look at a worked example. Sarah is a freelance graphic designer in Bristol. She works from a spare bedroom that is 12 square metres. Her flat is 80 square metres. Her annual home insurance premium is £240.

Using the floor area method, her business use is 12/80 = 15%. She can claim 15% of £240, which is £36 per year. She would record that £36 as a business expense on her self assessment return, using form SA103 (self-employment pages).

Sarah also needs to consider whether her insurer knows she runs a business from home. More on that below.

Limited Company Directors and Home Insurance

If you operate through a limited company, the rules are different. Your company cannot claim your home insurance directly because the insurance policy is in your personal name, not the company's name.

What you can do is claim a use of home as office expense. This is an annual allowance that HMRC accepts without detailed receipts. For 2025/26, the tax-free allowance is £6 per week (£312 per year) if you work at home regularly. Your company pays this to you tax-free, and the company deducts it as an expense.

Alternatively, your company can reimburse you for actual additional costs incurred by working from home. This would include a proportion of your home insurance premium. But you must have a formal agreement in place, and the reimbursement must be based on actual additional costs, not an arbitrary figure.

Most limited company directors use the £6 per week flat rate. It is simpler and avoids arguments with HMRC over apportionment calculations. The £312 per year is not huge, but it is better than nothing.

If you want to claim a higher amount based on actual costs, you need to keep detailed records. You would calculate the business proportion of your home insurance, electricity, heating, and broadband. Then your company reimburses you for that amount, and you include the reimbursement as income on your personal tax return. The company claims the deduction.

For most directors, the flat rate is the better option. The extra paperwork for a slightly higher claim rarely justifies the time spent.

Partnerships and Home Insurance

Partners in a business partnership follow similar rules to sole traders. The partnership can claim a proportion of home insurance if a partner works from home. The same apportionment methods apply.

Each partner's home insurance claim is calculated individually. If two partners both work from home, each claims their own proportion. The partnership records the total claim in its partnership return (form SA800).

The simplified expenses flat rate is also available to partners. It works the same way as for sole traders, based on hours worked from home per month.

What About Business Use Insurance?

This is where many business owners trip up. Standard home insurance policies often exclude business use. If you run a business from home and your insurer does not know, your policy could be invalidated.

You have two options:

  • Notify your insurer that you work from home. Many insurers will add business use cover for a small additional premium, often £20 to £50 per year. This covers your business equipment and public liability if a client visits your home.
  • Take out a separate business insurance policy for your business equipment and liability. Your home insurance then covers the building and personal contents as before.

If you pay extra for business use cover on your home insurance, that additional cost is fully claimable as a business expense. The base home insurance premium is still apportioned.

For example, your standard home insurance costs £200. You pay an extra £40 for business use endorsement. The £40 is a direct business expense. The £200 is apportioned based on your business use percentage, say 10%, giving a further £20 claim. Total claim: £60.

What HMRC Expects You to Record

If you claim home insurance on your taxes using the actual cost method, HMRC expects you to keep evidence. This includes:

  • A copy of your home insurance policy and renewal notice showing the premium.
  • Your calculation of the business proportion, with a clear explanation of the method used.
  • A note of the rooms or floor area used for business.
  • If using the time and space method, a log of hours worked from home.

Keep these records for at least six years after the tax year the claim relates to. HMRC can ask to see them during a compliance check.

If you use the simplified expenses flat rate, you only need to record the number of hours you work from home each month. HMRC accepts a reasonable estimate. You do not need to keep timesheets, but a rough log is sensible.

Common Mistakes to Avoid

Here are the most common errors we see when business owners claim home insurance on their taxes.

Claiming the full premium. Unless your home is used 100% for business, which is rare, you cannot claim the full amount. HMRC will disallow the excess and may charge interest and penalties.

Claiming through both methods. You cannot use the flat rate for some expenses and the actual cost method for others. Choose one approach and apply it consistently to all home-related expenses.

Not telling your insurer. If your home insurance policy excludes business use and you have an incident, your claim could be rejected. This is a risk worth avoiding. The extra premium is usually small.

Using the wrong apportionment basis. HMRC expects a fair and consistent method. If you claim 50% of your home insurance but only use one room out of six, HMRC will question it. Be realistic.

Claiming mortgage interest as a limited company director. This is a separate issue, but worth noting. Limited company directors cannot claim mortgage interest as a business expense. The £6 per week flat rate covers that.

Does It Matter If Clients Visit Your Home?

If clients or customers visit your home for business meetings, your insurance situation changes. Your standard home insurance may not cover public liability if a visitor is injured. You almost certainly need business use insurance or a separate policy.

From a tax perspective, having client visits strengthens your claim for a higher business proportion. You are using your home more intensively for business. A 15% to 25% apportionment for home insurance would be reasonable if you have regular client meetings.

If you never have client visits and work from a spare room, a 5% to 15% apportionment is more typical.

How to Record the Claim on Your Tax Return

For sole traders and partners, home insurance claimed under the actual cost method goes in the "use of home as office" section of your self assessment return. On the SA103 (self-employment pages), it appears under "other business expenses" or as part of your "premises costs" calculation.

If you use accounting software like Xero, FreeAgent, or QuickBooks, you can create a nominal code for "home office expenses" and allocate the apportioned insurance there. Your accountant will then map it correctly on your tax return.

For limited company directors claiming the £6 per week flat rate, your company payroll or expenses system should record the payment as a tax-free expense. If you use FreeAgent, it has a built-in function for this. Xero and QuickBooks also handle it through their expenses modules.

If your company reimburses actual costs, you need a formal expense claim. The company pays you the agreed amount, records it as a business expense, and you declare the reimbursement as miscellaneous income on your self assessment return. This is more complex and usually not worth the effort for home insurance alone.

When to Speak to an Accountant

The rules on claiming home insurance are not complicated for most business owners. If you are a sole trader using the flat rate, you do not need to think about it at all. If you are a limited company director using the £6 per week allowance, the same applies.

But if your situation is unusual, it is worth getting advice. Examples include:

  • You use more than 50% of your home for business.
  • You have a separate business insurance policy and want to understand the interaction with your home insurance claim.
  • You are a limited company director and want to claim actual costs rather than the flat rate.
  • You are unsure whether your home insurance policy covers business use.

As ICAEW qualified accountants, we deal with these questions regularly. The cost of a short consultation is usually recovered by getting the claim right.

Final Thoughts

You can claim home insurance on your taxes, but only the business proportion. For most people, that means a small percentage of the premium. The flat rate method for sole traders and the £6 per week allowance for limited company directors are simpler and avoid the need for detailed calculations.

The key takeaway is this: be realistic about your business use, tell your insurer, and keep a record of your calculation. If you do those three things, your claim will stand up to HMRC scrutiny.

If your circumstances are straightforward, you can handle this yourself. If not, contact us for advice specific to your situation.