Working From Home Expenses UK: What Sole Traders Can Claim (2026 Guide)

If you run your business from home, you may be able to claim a portion of your household costs as business expenses. This can reduce your taxable profit and ultimately lower your tax bill.

However, many sole traders either underclaim or avoid claiming altogether because they’re unsure what’s allowed.

In this guide, we’ll break down exactly what working from home expenses you can claim in the UK, how to calculate them, and which method is best for your situation.

What Are Working From Home Expenses?

Working from home expenses are the costs you incur by using your home for business purposes.

If you’re self-employed and use part of your home for work, HMRC allows you to claim a proportion of certain household expenses.

This applies whether you:

• Run a full-time business from home
• Work remotely
• Use a home office part-time

Who Can Claim Working From Home Expenses?

You can claim these expenses if you are:

• A sole trader
• A freelancer
• A contractor
• Running a small business from home

You must:

• Use part of your home for business
• Incur additional costs due to working from home

Two Methods to Claim Working From Home Expenses

HMRC provides two ways to calculate your claim:

1. Simplified Expenses (Flat Rate Method)

This is the easiest option and requires minimal record keeping.

You claim a fixed monthly amount based on hours worked at home:

When to use this:

• You want simplicity
• Your home costs are relatively low
• You don’t want to calculate proportions

2. Actual Cost Method (Apportionment)

This method allows you to claim a percentage of actual household bills.

You calculate:

• The number of rooms used for business
• The amount of time used for business

Example:

• 5 rooms in house
• 1 used as office
• Used 40% of the time for work

Your claim:
1/5 × 40% = 8% of eligible household costs

What Expenses Can You Claim?

If using the actual cost method, you can claim a proportion of:

Household Bills

• Electricity
• Gas
• Water
• Council tax

Internet & Phone

• Broadband (business portion only)
• Phone bills (business calls only)

Rent or Mortgage Interest

• Rent (if renting)
• Mortgage interest (not full repayments)

Important:
You cannot claim the full mortgage payment—only the interest portion.

What You Cannot Claim

There are some key restrictions:

• Personal use costs
• Entire household bills (must be apportioned)
• Capital repayments on mortgages
• Food and personal living expenses

Simplified vs Actual Method – Which Is Better?

This depends on your situation.

Simplified Method is better if:

• You want ease and speed
• You don’t have detailed records
• Your bills are relatively low

Actual Method is better if:

• You have high household costs
• You use a dedicated office
• You want to maximise tax savings

Example Calculation (Actual Method)

Let’s break it down:

Scenario:

• Monthly bills: £1,200
• 4 rooms in home
• 1 room used for work
• Used 50% of the time

Calculation:

1/4 × 50% = 12.5%
£1,200 × 12.5% = £150/month

Annual claim = £1,800

This is significantly higher than the flat rate method.

Can You Claim If You Occasionally Work From Home?

Yes—but only if:

• You regularly work from home
• You incur actual additional costs

If you occasionally check emails or do admin work, HMRC may reject the claim.

What About Limited Companies?

If you operate through a limited company, the rules are slightly different.

Typically:

• You claim expenses through the company
• Or the company reimburses you

There’s also a common £6 per week allowance for directors working from home.

Record Keeping Requirements

If you use the actual method, you must keep:

• Utility bills
• Rent/mortgage statements
• Internet bills
• Calculation breakdown

If using the simplified method, records are minimal—just track your working hours.

Common Mistakes to Avoid

1. Overclaiming

Claiming too much can trigger HMRC enquiries.

2. Claiming 100% of bills

Unless your home is exclusively a business premises (rare), this is not allowed.

3. Not adjusting for personal use

You must factor in time and shared usage.

4. Ignoring this expense entirely

Many sole traders miss out on legitimate claims.

Does Claiming Affect Capital Gains Tax?

Yes—this is important.

If you claim part of your home exclusively for business, you may:

• Lose part of your Private Residence Relief
• Pay Capital Gains Tax when selling your home

Tip:

Avoid designating a room as 100% business use.

Instead:

• Use it partly for personal use
• This helps preserve full CGT relief

How This Links to Other Expenses

Working from home expenses are just one part of your allowable expenses.

You should also consider:

• Office equipment
• Travel expenses
• Software subscriptions
• Professional fees

See our full guide on allowable expenses UK for a complete breakdown.

Should You Switch Methods Each Year?

Yes—you can choose the most beneficial method each tax year.

This allows you to:

• Adapt to rising energy costs
• Adjust for changes in working patterns

Quick Summary

• You can claim working from home expenses as a sole trader
• Two methods available:
  
  • Flat rate (simplified)
  • Actual cost (more detailed)
• You must apportion costs based on usage
• Avoid claiming exclusive business use of your home
• Good record keeping is essential

Working from home expenses are one of the most commonly overlooked tax deductions for sole traders.

While the simplified method is easy, the actual cost method can often provide significantly higher tax savings—especially with rising household bills.

Choosing the right method and calculating your claim correctly can make a meaningful difference to your overall tax position.