More people run businesses from home than ever. Whether it’s a consultancy, a trades business with a home office, a freelance operation, or an online shop run from the spare room, working from home is now the default for a huge number of sole traders and limited company directors.
The good news is that if you’re self-employed or running a limited company, you can claim a proportion of your home costs as a business expense – and the rules haven’t changed with the recent abolition of the employee working from home allowance.
That change, which took effect in April 2026, only affects employees. If you’re running your own business, the expense claims are still available and still worth taking advantage of.
Here’s how the tax side works, what you can claim, and the practical things you need to consider.
Claiming Home Office Expenses as a Sole Trader
If you’re self-employed and work from home, you can deduct a portion of your household running costs from your business profits. This reduces your taxable income and, in turn, your tax bill.
There are two ways to calculate the claim: the simplified method or the actual costs method.
The Simplified Method
HMRC’s simplified expenses scheme lets you claim a flat monthly rate based on the number of hours you work from home each month:
- 25 to 50 hours per month: £10
- 51 to 100 hours per month: £18
- 101 hours or more per month: £26
That works out to a maximum of £312 per year. It’s not a large sum, but it requires no receipts, calculations, or apportionment. You simply log your hours and claim the rate.
This method is only available to sole traders and partnerships, not to limited companies.
The Actual Costs Method
If your actual home office costs are higher than the flat rate (and for most people who work from home regularly, they will be), you can calculate the real proportion of household costs attributable to business use.
The costs you can include are:
- Heating, lighting, and electricity
- Council tax
- Rent (if you rent your home)
- Mortgage interest (not capital repayments)
- Water rates (if metered)
- Broadband and phone line
- Home insurance
- Repairs and maintenance to the property
You then apportion these costs based on the proportion of your home used for business. The most common approaches are dividing by the number of rooms (excluding kitchens, bathrooms, and hallways) or by floor area. If the room is shared between business and personal use, you further adjust for the proportion of time it’s used for work.
For example, if you have a four-room house and use one room exclusively as an office, and your annual household running costs total £12,000, you could claim £3,000 (25%) as a business expense. If the room is also used personally in the evenings, you’d reduce that figure further – perhaps to 50% of the room’s share, giving you a claim of £1,500.
There’s no single “correct” method. HMRC expects the apportionment to be reasonable and supportable. Keep a record of how you arrived at the figure.
Claiming Home Office Costs Through a Limited Company
If you run a limited company and use part of your home for business, the approach is slightly different.
The £6 Per Week Method
The simplest option is for the company to reimburse you £6 per week (£26 per month, £312 per year) for additional household costs. This can be paid tax-free and NIC-free without any receipts or evidence, as long as you genuinely work from home regularly.
The company claims the payment as a business expense against its corporation tax bill, and you don’t pay any personal tax on it.
Charging Rent to Your Company
For a larger claim, you can set up a formal rental agreement between you (as the homeowner) and your limited company. The company pays you rent for the use of the workspace, and the rent is deductible as a business expense for corporation tax purposes.
The rental amount must be reasonable and on an arm’s length basis – you can’t charge an inflated rent to extract profits. In practice, most accountants calculate this using the same room-apportionment principles as for sole traders.
A few things to be aware of with this approach:
- The rent you receive is personal income – you’ll need to declare it on your Self Assessment return
- You can offset allowable expenses against the rental income (the proportion of household costs attributable to the rented space)
- If the amount is structured correctly, the net personal tax can be minimal while still generating a corporation tax deduction for the company
This is worth doing properly with professional advice. A poorly structured arrangement can cost more in tax than it saves.
The Employee Working From Home Allowance: What’s Changed
From 6 April 2026, employees can no longer claim tax relief from HMRC for additional household costs when working from home. This was the £6 per week flat-rate deduction (or actual costs with evidence) that many people claimed during and after the pandemic.
The abolition only affects employees claiming directly from HMRC. It does not affect self-employed individuals, who continue to claim home office expenses as described above.
There’s one important exception: employers can still reimburse employees up to £6 per week for working from home without deducting tax or NIC. So if you’re a limited company director who is also an employee of your company, the company can still pay you the £6 per week tax-free. What’s changed is that you can no longer claim it yourself through Self Assessment if the company doesn’t pay it.
Capital Gains Tax: The Dedicated Room Question
One concern that comes up regularly is whether using part of your home for business creates a Capital Gains Tax problem when you sell the property.
Your main home is normally exempt from CGT under Private Residence Relief. But if part of the home is used exclusively for business, that part can lose its exemption.
The key word is “exclusively.” If you use a room as an office during the day and as a family room in the evenings, it’s not exclusively business use – and Private Residence Relief still applies to the whole property. HMRC’s guidance is clear on this: dual use of a room does not create a CGT issue.
The risk only arises if you have a room used solely for business, with no personal use at all, for a sustained period. In that scenario, a proportion of the gain on your home could become taxable. For most home-based businesses, this isn’t a problem – but it’s worth being aware of if you’re planning to dedicate an entire room solely to work.
Planning Permission, Insurance, and Mortgages
These are the practical considerations that often get overlooked.
Planning Permission
If you’re running a business from home that doesn’t change the character of your property – no extra traffic, no signage, no structural alterations, no noise – you generally don’t need planning permission.
This covers most consultants, freelancers, online businesses, and administrative-type work.
If your business involves frequent client visits, deliveries, employees coming to work at your home, or anything that affects your neighbours, check with your local council. Permission may be required.
Insurance
Standard home insurance usually excludes business use. If you have business equipment at home, hold stock, or have clients visiting, you’ll need to tell your insurer and may need a specific home business insurance policy. Without it, you risk voiding your home insurance entirely.
If you employ staff who visit or work from your home, employers’ liability insurance is a legal requirement.
Mortgage and Tenancy
If you have a mortgage, check whether your lender’s terms allow business use. Most residential mortgages include a restriction on using the property for commercial purposes.
In practice, administrative and office-based work rarely causes an issue, but it’s worth confirming – especially if you’re running a more intensive business from the property.
If you rent your home, check your tenancy agreement. Many leases prohibit running a business from the property without the landlord’s written consent.
Record-Keeping
Whatever method you use to claim home office expenses, keep clear records. For the simplified method, log your hours. For the actual costs method, keep copies of your household bills and document how you’ve calculated the business proportion.
If you’re claiming through a limited company, keep a copy of the rental agreement and records of the payments. HMRC can ask for evidence at any time during the retention period – five years for sole traders, six years for limited companies.
Good bookkeeping habits here don’t just protect you in an enquiry – they also make sure you’re claiming everything you’re entitled to. Many home-based business owners underclaim because they haven’t tracked their costs properly.
How Double Point Can Help
Home office expenses are one of the most commonly underclaimed deductions we see.
Many sole traders and directors either don’t realise they can claim, use the flat rate when actual costs would give them a larger deduction, or don’t have the records to support their claim.
At Double Point, we help home-based businesses structure their expense claims correctly, whether that’s calculating the correct proportion of household costs, setting up a rental agreement between a director and their company, or ensuring everything is properly documented for HMRC.
We also handle Self Assessment returns, company accounts, and bookkeeping – so the home office claim is just one part of making sure your overall tax position is as efficient as it should be.
Book a free consultation with us today and let’s make sure you’re claiming everything you’re entitled to.