How To Claim Use Of Home As Office: Flat Rate, Actual Costs and the Director Routes

If you work from home, there is a deduction to claim, but the route depends entirely on how your business is set up. A sole trader or partner chooses between HMRC's simplified flat rate and an actual cost apportionment. A limited company director cannot use the sole trader flat rates at all: the company either pays the £6 a week homeworking allowance or rents the space from the director under a licence agreement. Employees are a fourth, much more restricted, case.

This guide covers each route in turn, with worked examples, the comparison table, the record keeping HMRC expects, and the capital gains trap that catches people who make a room exclusively business. Figures are current for the 2026/27 tax year; where a rate also applied in 2025/26 (the return most people are filing now) it is the same unless stated.

Which Route Applies To You

Route	Who can use it	Typical annual value	Records needed
Simplified flat rate (£10/£18/£26 a month)	Sole traders and partners only	Up to £312	Monthly hours log
Actual costs apportionment	Sole traders and partners	Often £500 to £3,000+	Bills, room count, hours log, the calculation
£6 a week homeworking allowance	Limited company directors and employees, paid by the company	£312	None (no receipts required)
Rental licence agreement	Limited company directors	Set by the agreement, at a commercial rate	Written licence, board minute, rent workings, property pages on your return
Employee relief claim (s.336)	Employees who have to work from home	£6 a week relief, or evidenced actual extra costs	Evidence home working is required, not chosen

Route 1: The Simplified Flat Rate (Sole Traders and Partners)

HMRC's simplified expenses regime gives sole traders and partnerships an hours-based monthly flat rate for use of home. You do not need receipts, floor areas, or apportioned bills. The monthly rates are:

Hours worked from home per month	Flat rate per month
25 to 50	£10
51 to 100	£18
101 or more	£26

You total your monthly claims and enter the figure as a deduction against trading profit on your Self Assessment return. Working 101 or more hours from home every month gives the maximum of £312 for the year (£26 x 12).

Three rules people miss. First, the 25-hour floor: a month in which you work fewer than 25 hours from home does not qualify for the flat rate, though you can still claim actual additional costs for that month. Second, the rate is per person, not per business: if you and your spouse each run a business from the same home, you each claim at your own rate; if you alone run two trades, you claim once on your combined hours. Third, and most important, the simplified rates are not available to limited companies. A director claiming £26 a month through their company is using the wrong regime; the director routes are covered below.

The flat rate covers general household running costs (heating, lighting, council tax). It does not cover phone or broadband, so you claim the business proportion of those separately on top. And the flat rate is an option, not a cap: if your actual additional costs are lower than the flat rate, you may still use the flat rate. You are not required to prove your costs reach it.

Route 2: The Actual Costs Method (Sole Traders and Partners)

If your business use of home is substantial, apportioning your actual household costs almost always yields more than £312. This is how to deduct home business expenses properly, and it is also the calculation a company must use if it reimburses a director more than £6 a week.

You can claim a business proportion of:

• Mortgage interest (never capital repayments) or rent
• Council tax
• Water rates (if metered and business use increases them)
• Gas and electricity
• Buildings and contents insurance (home insurance qualifies only in proportion to business use; it is not fully claimable)
• Broadband and telephone line rental
• Cleaning, and repairs to the room you use

You cannot claim mortgage capital repayments, food, or improvements that benefit the whole property. For the full list of what a sole trader can deduct beyond the home, see our allowable expenses checklist for sole traders.

The Room and Hours Calculation

HMRC accepts any fair and reasonable apportionment. The standard approach is rooms first, then time:

1. Count the rooms in your home, excluding bathrooms, hallways and kitchens (unless used exclusively for business).
2. Divide to get the room fraction for the room(s) used for business.
3. If the room is not used for business all the time, multiply by the business-hours fraction.

Worked example 1, substantial use. A freelance graphic designer in Bristol rents a two-bedroom flat and uses the second bedroom as her office for 35 hours a week; during the week the room is used almost exclusively for business, with only minor private use (deliberate dual use rather than exclusive use, see the capital gains section). The flat has four countable rooms. Her annual costs:

• Rent: £9,600
• Council tax: £1,800
• Gas and electricity: £1,200
• Broadband: £360
• Contents insurance: £120
• Total: £13,080

Room fraction: 1/4 = 25%. Because business use dominates and private use is minor, a full room fraction with no time apportionment is reasonable. Claim: £13,080 x 25% = £3,270. A room shared materially with the household would instead need the hours fraction from step 3.

Against the £312 flat rate maximum, that is £2,958 more in deductions. As a basic-rate taxpayer she saves 20% income tax plus 6% Class 4 National Insurance on the extra: £2,958 x 26% = £769 a year. At the higher rate (40% plus 2% Class 4) it is £2,958 x 42% = £1,242. An hour of paperwork for several hundred pounds is clearly worth it.

Worked example 2, light use. A consultant in Manchester uses the dining room of a six-room house for 30 hours a week, 48 weeks a year, with heavy personal use the rest of the time. Total household costs £15,000. Room fraction: 1/6. Time fraction: 30 out of 168 hours a week. Claim: £15,000 x 1/6 x 30/168 = £446.

Here the flat rate (£312 at 101+ hours a month) is only £134 behind, worth £27 of tax at 20% or £54 at 40%, and many people reasonably take the simpler option. The general pattern: a room used substantially for business justifies actual costs; kitchen-table working suits the flat rate.

Route 3: Limited Company Directors

A director working from home has two legitimate routes, and the sole trader flat rates above are not one of them.

The £6 A Week Homeworking Allowance

The company can pay you up to £6 per week (£26 per month, £312 per year) tax free, with no receipts required, under the homeworking exemption in section 316A ITEPA 2003. The payment is deductible for the company, free of tax and National Insurance for you, and needs nothing more than a note of the weeks worked at home. There must be a genuine homeworking arrangement (regular work at home, not the odd evening), but for a director running the company from home that test is comfortably met.

If your actual additional household costs exceed £6 a week, the company can instead reimburse the calculated additional cost, using the actual costs method above, with the workings kept at the company. The reimbursement stays tax free only up to the genuine additional cost incurred.

The Rental Licence Agreement Route

Where a meaningful part of the home is given over to the company, a director can go further: grant the company a non-exclusive licence to occupy part of the home and charge it rent. The tax consequences on each side are:

• For the company: the rent is an allowable expense, saving corporation tax at 19% to 25% depending on profits. There is no employer National Insurance on rent, unlike salary.
• For you: the rent is property income, declared on the property pages of your Self Assessment return. You deduct the apportioned costs of providing the space (the same room-and-hours calculation), so if the rent is set at or near cost, the taxable rental profit can be small or nil. Note that for an individual, any mortgage interest in that calculation is relieved only as a basic-rate (20%) tax reducer, not a full deduction.
• Paperwork matters: a written licence agreement and a board minute, with the rent at a justifiable commercial level. Without the agreement, HMRC can treat the payments as earnings.

The rental route makes sense where the £6 a week allowance is trivially small next to the real cost of the space. It interacts with how you take the rest of your income, so read it alongside our tax-efficient salary and dividend split guide, and see our companion piece on claiming home office expenses through a limited company for the company-side detail.

Employees: The Strict Section 336 Position

The common misconception is that anyone working from home can claim the relief. That was briefly close to true: during the pandemic HMRC allowed employees to claim a full year's relief if they were required to work from home for even one day. That easement ended on 5 April 2022.

An employee can now claim tax relief for home working costs only where the strict test in section 336 ITEPA 2003 is met: the expenses must be incurred wholly, exclusively and necessarily in the performance of the duties. In practice HMRC accepts a claim only where you have to work from home, for example because the job requires you to live far from the employer's premises or the employer has no premises you can attend. Choosing to work from home, or hybrid working under a flexible arrangement, does not qualify, even if your contract permits it.

If your employer pays you the £6 a week homeworking allowance, that is tax free under section 316A and no claim arises. If it does not, and you meet the strict test, you can claim £6 a week (worth £1.20 a week at basic rate) or evidenced actual additional costs.

The Capital Gains Trap: Never Make The Room Exclusive

When you sell your main home, private residence relief normally exempts the whole gain from capital gains tax. But the relief is restricted for any part of the home used exclusively for business throughout your ownership: the gain apportioned to that part becomes chargeable, at 18% or 24% depending on your band (see our capital gains tax rates guide).

The fix is simple and legitimate: keep genuine dual use. If the office is also a guest bedroom, houses the family printer, or is used personally in the evenings, no part of the home is exclusively business and full relief is preserved. This is also why the time apportionment in the actual costs method is not a defect but a feature: it evidences the dual use. The same warning applies with more force to the rental licence route; the licence should be non-exclusive and the room should retain personal use.

Claiming the flat rate, the £6 a week allowance, or a time-apportioned actual costs deduction does not by itself create a capital gains problem.

What HMRC Expects You To Keep

For the simplified flat rate or the £6 a week allowance: no receipts, just a log of the hours (or weeks) worked from home. A calendar note is sufficient.

For actual costs, keep:

• Copies of household bills (gas, electricity, broadband, rent or mortgage statements, council tax, insurance)
• A room count or floor plan showing the business proportion
• An hours log, especially where the room is not used for business full time
• The calculation itself, step by step

For the rental licence route, add the written licence agreement, the board minute, and the workings behind the rent figure.

If HMRC enquires and you cannot produce the evidence, the claim can be disallowed with interest and penalties. Self-employed records should be kept for at least 5 years after the 31 January filing deadline for the year.

Claiming On Your Tax Return

Sole traders and partners enter the figure in the "use of home as office" box within allowable expenses on the self-employment pages (SA103). Software such as FreeAgent, Xero, or QuickBooks has a dedicated field. Flat rate users total their monthly amounts (£10, £18, or £26 by month); actual costs users enter the calculated figure. You choose one method for the whole tax year and cannot mix them.

Directors do not claim through Self Assessment for the £6 a week or reimbursement routes: the company records the payment as an expense in its accounts. Only the rental licence route touches your personal return, as property income on the property pages.

Common Mistakes

• Mixing methods in one year. Flat rate or actual costs, for the whole tax year, not both.
• Claiming mortgage capital repayments. Only the interest element is allowable; capital repayments reduce your loan, not your tax.
• A director using the sole trader flat rates. The £10/£18/£26 simplified expenses regime is for unincorporated businesses only. Directors use £6 a week, a costed reimbursement, or a rental licence.
• Calling a room exclusive when it is not. If the "office" also stores personal items, apply the time apportionment. And deliberately keeping some personal use protects your capital gains position.
• An employee claiming for chosen home working. Post-April-2022, preference and hybrid arrangements do not qualify under section 336.

When To Use an Accountant

The flat rates need no help. The actual costs method is manageable where the layout is simple. Take advice where the claim is large (over £1,000), where you are weighing the rental licence route against the £6 allowance, where exclusivity and the capital gains interaction are in play, or where the home use sits alongside a wider structure decision. We are experienced accountants and deal with home office claims across every business type; contact our team for a review of your position.