If you run your business from home but also rent a desk at a co-working space in Manchester's Northern Quarter or a shared office in Bristol's Harbourside, you have a dual-use expense problem. You are spending money in two places, but HMRC will not let you claim the same cost twice. The question is whether you can claim tax relief on both at all.
The short answer is yes, you can claim relief for both a home office and a co-working space, provided each claim reflects genuine business use and you do not double-count. But the rules differ depending on whether you use HMRC's simplified method or claim actual costs. And the co-working membership itself needs to pass the "wholly and exclusively" test.
This post covers how a sole trader home office and co-working setup works for tax purposes, what HMRC expects, and how to avoid common mistakes that trigger enquiries.
The Basic Rule: Wholly and Exclusively for Business
HMRC allows you to deduct expenses that are incurred "wholly and exclusively" for the purposes of your trade. That phrase matters. If you use your home office for both business and personal activity, the cost is not wholly and exclusively for business. You must apportion it.
With a co-working space, the test is simpler. If you pay a monthly membership to WeWork or a local independent co-working space and you use that space solely for your freelance consulting or ecommerce business, the cost is wholly and exclusively for trade purposes. You can claim the full amount.
But if you also work from home, you cannot claim the full cost of both as if you used each 100% of the time. HMRC expects you to apportion your home office costs based on the time you actually work there versus the time you work at the co-working space.
Claiming for a Home Office: Two Methods
HMRC gives sole traders two ways to claim home office costs. The method you choose affects how the co-working claim interacts with your home claim.
Method 1: Simplified Expenses (Flat Rate)
The simplified method lets you claim a fixed weekly amount based on the hours you work from home. For 2025/26, the rates are:
- 25 to 50 hours worked from home per month: £10 per month
- 51 to 100 hours: £18 per month
- 101 hours or more: £26 per month
This method is straightforward. You do not need to calculate actual bills. You just record the hours you work from home and apply the flat rate. If you also pay for a co-working space, you claim the full co-working membership separately.
The catch is that the flat rate is designed to cover all your home office costs: heating, electricity, insurance, council tax, internet. If you claim the flat rate and also claim a co-working space, HMRC will accept that as long as you are not claiming the same underlying costs twice. The flat rate covers your home costs. The co-working membership covers your costs away from home. They are separate.
For most sole traders using a sole trader home office and co-working combination, the simplified method is the cleanest option. It removes the need to apportion actual bills between home and co-working usage.
Method 2: Actual Costs (Apportionment)
If you prefer to claim your actual home office costs, you need to apportion them based on the number of rooms used for business and the time spent working in each location.
Here is how it works in practice. Say you live in a three-bedroom house in Sheffield's Kelham Island. You use one room as a dedicated office. Your annual household bills (mortgage interest, rent, council tax, utilities, insurance, broadband) total £6,000. You allocate one third of that to the office: £2,000. Then you apportion that £2,000 by the proportion of time you actually work from home versus the co-working space.
If you work 40 hours per week total and spend 20 hours at home and 20 hours at the co-working space, you claim half of the £2,000: £1,000. The other £1,000 relates to time you were not using the home office for business, so it is not deductible.
You also claim the full cost of the co-working membership, say £300 per month (£3,600 per year), because that is wholly and exclusively for business. Total home plus co-working claim: £4,600.
If you used the simplified method instead, you would claim £26 per month for home (£312 per year) plus the £3,600 co-working membership: £3,912 total. The actual cost method gives a higher claim in this example, but it requires more record keeping and a defensible apportionment method.
Can You Claim Both If You Have a Dedicated Home Office?
Yes. Having a dedicated room used only for business strengthens your home office claim under the actual cost method because the room is wholly and exclusively for business. You still need to apportion by time if you also use a co-working space, but the room-based apportionment becomes simpler.
If the room is used exclusively for business, you can allocate a proportion of household costs based on the number of rooms (for example, 1 room out of 5 total rooms = 20%). Then you time-apportion that 20% based on the hours you actually work from home versus the co-working space.
HMRC has no specific rule that says you cannot claim both. The key is that you can demonstrate that each expense relates to genuine business activity and that you have not claimed the same cost twice.
What About Travel Between Home and Co-working?
This is where sole traders often trip up. Travel from your home to a co-working space is ordinary commuting, not business travel. You cannot claim tax relief on the cost of getting there and back, whether by car, train, or bus. HMRC treats this as a personal journey because the co-working space is your place of work.
However, if you travel directly from the co-working space to a client site, that journey is business travel. You can claim mileage or actual costs for that leg. Keep a logbook or use an app like Dext to record business journeys separately from commuting.
The same rule applies to home. Travel from home to a client site is business travel. Travel from home to the co-working space is not.
Co-working Membership: What Is and Is Not Allowable
Most co-working memberships are fully deductible as a business expense. That includes desk rental, meeting room hire, printing credits, and coffee. But there are exceptions.
If your membership includes personal perks that you use for non-business purposes, HMRC may challenge the deduction. For example, if your co-working space offers free yoga classes or a gym and you use them personally, the cost of those elements is not allowable. Some co-working spaces bundle these into a single fee. In that case, you need to apportion the cost or choose a membership tier that excludes personal benefits.
Also, if you sign a long-term lease on a dedicated office within a co-working space, the rules change. A lease on a specific room is treated as commercial property rental, not a simple membership. That brings different tax treatment and potential VAT implications. For most sole traders using hot desks or shared spaces, the standard membership deduction is fine.
Record Keeping Requirements
HMRC expects you to keep records that support your claims. If you use the simplified method, you only need to record the hours you work from home each month. That is easy to do with a simple spreadsheet or a note in your bookkeeping software like Xero or FreeAgent.
If you use the actual cost method, keep copies of your household bills, a floor plan showing the room used for business, and a log of hours worked at home versus the co-working space. HMRC may ask for this if they open an enquiry. Without it, your claim could be disallowed and penalties applied.
For the co-working membership, keep invoices or receipts. If your membership includes personal perks, ask the co-working provider for a breakdown of costs so you can apportion correctly.
Common Mistakes to Avoid
The most common mistake sole traders make with a sole trader home office and co-working setup is claiming the full home office cost without time-apportioning. If you work 20 hours from home and 20 hours from a co-working space, you cannot claim 100% of your home office costs. HMRC will disallow the excess and may charge interest and penalties.
Another mistake is claiming the simplified flat rate for home and then also claiming actual home costs like broadband or electricity separately. The flat rate is intended to cover all home office costs. You cannot mix methods for the same expense category.
Finally, do not claim the co-working membership if you also claim the full cost of a dedicated home office without any apportionment. That is a red flag for HMRC. It suggests you are not actually using both spaces for business, or you are double-claiming.
Practical Example: A Freelance Graphic Designer in Leeds
Take a freelance graphic designer based in Leeds city centre. She rents a hot desk at a co-working space in the Leeds Dock area for £250 per month. She also works from her home office in a two-bedroom flat in Headingley two days per week.
She uses the simplified method for her home office. She works 16 hours per week from home (about 64 hours per month), so she claims £18 per month under the flat rate. She claims the full £250 per month for the co-working desk. Total annual claim: £3,216.
If she used the actual cost method, she would calculate her home office costs. Her flat has two bedrooms, one used exclusively as an office. Total annual household bills are £4,800. She allocates 50% to the office (one room out of two): £2,400. She works 40 hours per week total, 16 hours at home, so she time-apportions: 16/40 = 40%. £2,400 x 40% = £960. Plus the co-working membership: £3,000. Total: £3,960.
The actual cost method gives her an extra £744 per year. But it requires more paperwork. For most sole traders, the simplified method is sufficient and safer if HMRC ever enquires.
What If You Stop Using the Co-working Space?
If you cancel your co-working membership and work only from home, your home office claim reverts to the standard rules. You can claim the full home office cost (apportioned by room and time) or the flat rate. There is no restriction simply because you previously used a co-working space.
Similarly, if you stop working from home and use only the co-working space, you claim the full co-working membership and no home office costs. Do not continue claiming home office costs after you have stopped working there.
When to Speak to an Accountant
If your home office and co-working setup is straightforward and you use the simplified method, you can handle it yourself through your self assessment return (SA100 with SA103 self-employment pages). But if you have high household costs, a complex apportionment, or a co-working membership with personal benefits, it is worth getting advice.
Our ICAEW qualified team at Holloway Davies deals with these scenarios regularly. If your turnover is growing or your business structure is changing, get in touch to discuss your specific situation.
For more guidance on self assessment and expenses, see our sole trader and self employment blog. If you are considering incorporating, our incorporation guide covers the tax implications of moving from sole trader to limited company.
Final Takeaway
You can claim tax relief for both a home office and a co-working space as a sole trader. Use the simplified flat rate for home costs to keep it simple. Claim the full co-working membership if it is wholly for business. Do not double-count. Keep records of hours worked in each location. And remember: travel between home and co-working is not deductible.
The rules are not complicated once you understand the apportionment principle. Apply them correctly, and you can legitimately reduce your tax bill while working in the spaces that suit your business.