For the millions of self-employed individuals working from home, claiming a deduction for the associated household costs is a key part of reducing their tax liability. HMRC provides two distinct methods for calculating this expense: a simplified flat-rate system and a more detailed calculation based on actual costs. The choice between these methods is a strategic one, with significant implications for both the potential tax saving and the administrative burden.
Method 1: HMRC’s Simplified Expenses for the Self-Employed
HMRC’s simplified expenses scheme offers a straightforward, low-admin option for calculating home working costs. This method is available to sole traders and business partnerships, but not to limited companies. To be eligible, the individual must work from home for 25 hours or more per month.
Instead of apportioning individual household bills, the taxpayer claims a fixed monthly amount based on the number of hours they work from home. HMRC states the flat rates are as follows :
- £10 per month for 25 to 50 hours of business use.
- £18 per month for 51 to 100 hours of business use.
- £26 per month for 101 or more hours of business use.
This system provides certainty and removes the need for complex calculations, which can be appealing. However, it is crucial to understand its limitations. HMRC guidance specifies that the flat rate is designed to cover the costs of heat, light, and power only. It explicitly “does not include telephone or internet expenses”. A taxpayer using the simplified method must still calculate the business portion of their phone and broadband bills separately, based on actual usage, and claim this in addition to the flat rate.
The simplified expenses scheme acts as a “safe harbour” provision. The rates are deliberately conservative, offering a guaranteed deduction with minimal justification required beyond a record of hours worked. This makes it most suitable for individuals with low marginal home running costs (for example, someone living in a small, energy-efficient flat) or for those who prioritise administrative simplicity above all else. The maximum annual claim under this method is £312 (£26 \times 12), which for many full-time home workers will be significantly less than their actual business-related household expenditure.
Method 2: Calculating Actual Costs – A Forensic Approach
The alternative to the simplified flat rate is to calculate and claim a proportion of the actual running costs of the home. This method, while requiring more detailed record-keeping, often results in a substantially larger tax deduction.
Under this approach, a taxpayer must apportion their household bills on a “fair and reasonable” basis between private and business use. HMRC allows a proportion of a wider range of costs to be included :
- Heating and electricity bills
- Council Tax
- Mortgage interest (not the capital repayment element) or rent
- Home insurance
- Broadband and telephone line rental
There is no single prescribed method for apportionment, but common approaches accepted by HMRC involve calculations based on the number of rooms in the property or the amount of time a specific area is used for business. For example, HMRC provides guidance for a scenario with a four-room home where one room is used as an office. In this case, it would be reasonable to claim one-quarter of the utility bills as a business expense. This figure would then be further apportioned if the room is also used for personal activities.
While this method can unlock a higher deduction, it introduces a significant potential tax risk that must be managed carefully. HMRC guidance warns that if any part of a home is used exclusively for business purposes, that portion may lose its exemption from Capital Gains Tax (CGT) under Private Residence Relief when the property is eventually sold. This could lead to an unexpected and substantial CGT liability that outweighs years of income tax savings. The solution, and standard advice, is to ensure the home office space has some element of dual use. For example, it may also function as a guest bedroom or be used for personal administration in the evenings. This mixed-use preserves the full CGT relief on the property. Therefore, the decision to use the actual cost method requires a balanced consideration of both short-term income tax benefits and long-term capital gains tax implications.
Deciding Your Home Office Claim: Simplified vs. Actual Costs
The following table provides a direct comparison to help taxpayers decide which method is most appropriate for their circumstances.
| Criteria | Simplified Expenses Method | Actual Costs Method |
| Eligibility | Sole traders and partnerships working 25+ hours/month from home. | All self-employed individuals working from home. |
| Calculation | A fixed monthly flat rate based on hours worked. | A “fair and reasonable” apportionment of actual household bills. |
| Covered Expenses | Heat, light, and power only. | Heat, light, power, Council Tax, rent, mortgage interest, insurance etc.. |
| Phone & Internet | Claimed separately based on actual business use. | Claimed separately based on actual business use. |
| Record-Keeping | A log of business hours worked from home. | Copies of all relevant household bills plus the apportionment calculation. |
| Potential Deduction | Capped at £312 per year (£26 \times 12). | Potentially much higher, dependent on actual household running costs. |
| CGT Risk on Home Sale | None. | A potential risk exists if a room is used exclusively for business. |
FAQs
How much can you claim for home office expenses in the UK?
The amount you can claim depends on the method you use and your specific circumstances. There are two primary methods for claiming: a simplified flat rate or the actual costs method. If you are an employee working from home, your employer can pay you an allowance of up to £6 per week (£26 per month) tax-free. If your employer does not pay this, you can claim tax relief on this amount from HMRC. If you are self-employed, you can use a simplified flat rate based on the hours you work from home each month, or you can calculate the actual additional costs incurred.
What is the maximum tax deduction for a home office?
There is no theoretical maximum tax deduction if you are calculating and claiming your actual additional costs. The amount you can claim is limited only by the actual, provable expenses you incurred “wholly and exclusively” for your business. This would involve apportioning household bills like heat, electricity, and insurance based on the proportion of your home used for business and the amount of time it is used. For those using the simplified methods, the maximum flat rate for the self-employed is £26 per month if you work 101 or more hours from home in that month.
What is the maximum you can claim for a home office?
The maximum you can claim is directly tied to the method you use. Under the simplified method for the self-employed, the maximum claim is a flat rate of £26 per month (or £312 per year). If you are claiming based on actual costs, the maximum is the total of your calculated, allowable expenses. For example, if your calculations show that the business proportion of your utility bills, council tax, and mortgage interest amounts to £1,000 for the year, that would be the maximum you could claim under this method.
What is the maximum home office deduction under the simplified method?
For self-employed individuals using the simplified method (also known as flat-rate expenses), the maximum deduction is determined by the number of hours you work from home per month. The rates for the 2024/2025 tax year are:
- 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 Therefore, the absolute maximum you can claim under this method is £26 per month.
What can I claim if I have a home office?
If you use the actual costs method, you can claim a proportion of your household running costs. This includes a portion of:
- Utility bills: such as heating and electricity.
- Council Tax.
- Mortgage interest (not the capital repayment part) or rent.
- Home insurance.
You can also claim the full cost of business-specific expenses like business phone calls, stationery, and business rates if applicable. You cannot claim for expenses that have a dual private and business purpose, like redecorating your whole house. The portion you claim for household costs must be reasonable, for example, based on the number of rooms in your house used for business or the time spent working there
What is the double dipping tax deduction?
“Double dipping” in a tax context is a term for claiming the same expense twice or improperly claiming two different tax reliefs for the same cost. For example, if a self-employed person claimed the £26 per month simplified flat rate for home office use, they could not then also claim a proportion of their actual electricity bill. HMRC rules are designed to prevent this, ensuring that you only receive tax relief once for any given business expense.
Can I claim an air conditioner for a home office?
Claiming for an air conditioner for a home office can be complex. You generally cannot claim it as a simple running expense. An air conditioner is typically considered a piece of equipment, falling under capital allowances. For it to be an allowable expense, you must be able to prove it is “wholly and exclusively” for business use. If the air conditioner is a portable unit used solely in your office space during working hours, you may be able to claim it. However, if it’s part of a central system that cools the entire house, it would not be allowable as it provides a significant private benefit.