Working from home has become increasingly common, and if you use part of your home for business purposes, you may be entitled to significant tax relief. This comprehensive guide explains exactly how to claim home office expenses under current HMRC rules for the 2025/26 tax year.

What Are Home Office Expenses?

Home office expenses, officially known as “use of home as office” allowances, are tax deductions you can claim when you use part of your home exclusively for business purposes. These deductions can help reduce your taxable profit, ultimately lowering your Corporation Tax or Income Tax bill.

HMRC allows these claims because working from home increases your household running costs – from higher electricity bills to additional heating and broadband usage.

Who Can Claim Home Office Expenses?

You can claim home office expenses if you:

• Use part of your home “wholly and exclusively” for business purposes

• Are self-employed (sole trader or partnership)
• Run a limited company from home
• Are required by your employer to work from home

Important: You cannot claim if working from home is purely your choice and you have access to suitable office facilities elsewhere.

HMRC Home Office Allowance Rates for 2025/26

For Limited Company Directors

Directors can claim a flat rate of £6 per week (£26 per month, totalling £312 annually) for the 2024/25 and 2025/26 tax years. This rate has remained unchanged since April 2020.

For Self-Employed (Sole Traders)

Under HMRC’s simplified expenses regime, self-employed individuals can claim:

• £10 per month if you work from home 25-50 hours monthly
• £18 per month if you work from home 51-100 hours monthly
• £26 per month if you work from home more than 101 hours monthly

For Employees

Employees required to work from home can claim £6 per week (£24 per month) through their employer or via Self Assessment if the employer doesn’t provide this allowance.

Two Methods for Claiming Home Office Expenses

Method 1: Simplified Flat Rate (Recommended for Most)

The flat rate method is straightforward and doesn’t require detailed record-keeping:

Advantages:

• No receipts required
• Quick and simple calculation
• HMRC rarely challenges these claims
• No Capital Gains Tax implications

Limitations:

• Fixed amounts may be lower than actual costs
• Doesn’t include telephone or internet expenses (claim separately)

Method 2: Actual Costs Method

This involves calculating your actual household expenses and claiming the business proportion:

What you can claim:

• Gas and electricity bills
• Water rates
• Council tax (in some circumstances)
• Rent or mortgage interest
• Building insurance
• Home maintenance and repairs
• Cleaning costs

How to calculate:

1. Work out total household running costs for the tax year
2. Calculate business usage percentage – typically based on:
   • Number of rooms used for business vs total rooms
   • Hours worked from home vs total hours
   • Floor area used for business
3. Apply the business percentage to your total costs

HMRC doesn’t provide an exact formula – they simply require the division between business and private use to be “reasonable”.

What Counts as a “Room” for HMRC Purposes?

Kitchen, bathrooms, and hallways don’t count as rooms for tax purposes – only living rooms, bedrooms, and dedicated office spaces qualify.

Record Keeping Requirements

For simplified expenses: Keep basic records of hours worked from home.

For actual costs method:

• All household bills and receipts
• Evidence of business usage calculations
• Photos of your home office setup
• Details of any equipment purchased
• Documentation showing business necessity

Capital Gains Tax Considerations

Important Warning: If you claim a proportion of your home as exclusively business use, you may face Capital Gains Tax on that portion when you sell your property. This is why many people stick to the £6 weekly allowance or ensure some personal use of the claimed space.

To avoid CGT issues:

• Use your office space for some personal activities
• Consider the flat rate method
• Seek professional advice before claiming large proportions of your home

Additional Claimable Expenses

Equipment and Furniture

• Office furniture qualifies for Annual Investment Allowance (up to £25,000)
• Computer equipment and software
• Stationery and office supplies
• Business telephone line costs

Internet and Phone Costs

These aren’t included in flat rate allowances and can be claimed separately based on business usage percentage.

Common Mistakes to Avoid

1. Claiming without genuine business use – HMRC requires “wholly and exclusively” business purpose
2. Inadequate record keeping – maintain clear documentation of business usage
3. Ignoring CGT implications – understand long-term tax consequences
4. Mixing methods inconsistently – you can switch methods each year but be consistent within the tax year
5. Claiming non-qualifying rooms – kitchens and bathrooms don’t count

---

---

---

HMRC’s internal manuals specifically tell Tax Inspectors not to waste time checking small claims, particularly the standard flat rate allowances. However, larger claims using actual costs may attract attention and require detailed justification.

VAT Considerations

If you’re VAT registered, you can reclaim VAT on business expenses, but this requires:

• Valid VAT receipts
• Clear business purpose
• Proper apportionment between business and personal use

---

Consultants and Freelancers

Often qualify for simplified flat rate due to minimal equipment needs.

Online Retailers

May need substantial storage space for inventory – actual costs method often more beneficial.

Creative Professionals

May use multiple rooms (studio space, office) – requires careful documentation and justification.

How to Claim on Your Tax Return

Self-Employed

Include home office expenses in your business expenses section of your Self Assessment return.

Limited Companies

Record as an allowable business expense in your company accounts, reducing Corporation Tax liability.

Employees

Claim through employer payroll or via Self Assessment using form P87.

Professional Advice: When You Need It

Consider professional help when:

• Your home office claim exceeds £1,000 annually
• You use multiple rooms for business
• You’re considering the actual costs method
• You have complex business structures
• You’re planning to sell your property

Maximising Your Home Office Tax Relief

1. Keep detailed time logs of home working hours
2. Photograph your office setup for evidence
3. Maintain all household bills throughout the year
4. Consider equipment purchases for additional allowances
5. Review annually – you can switch between methods each tax year
6. Plan for property sales – understand CGT implications in advance

Future Changes and Updates

HMRC regularly reviews home office allowance rates. The current rates have been stable since 2020, but with increasing home working trends and rising energy costs, future increases are possible.

Stay informed by:

• Checking HMRC’s official guidance annually
• Consulting with qualified accountants
• Monitoring government announcements on working from home policies

Conclusion

Home office expenses can provide valuable tax relief, but the rules are complex and the wrong approach can have long-term consequences. Whether you choose the simple flat rate or calculate actual costs, ensure you understand the implications and maintain proper records.

The key is finding the right balance between maximising legitimate tax relief and avoiding future complications, particularly around Capital Gains Tax when you eventually sell your home.

Need Expert Help with Your Home Office Expenses?

At FSL Accountancy Ltd, our experienced team of chartered accountants in Luton specialises in helping businesses and self-employed individuals maximise their tax relief whilst staying fully compliant with HMRC rules.

We can help you:

• ✅ Determine the best claiming method for your circumstances
• ✅ Calculate accurate business usage percentages
• ✅ Set up proper record-keeping systems
• ✅ Plan for Capital Gains Tax implications
• ✅ Handle HMRC enquiries and audits
• ✅ Maximise all available tax reliefs

Contact FSL Accountancy Ltd today for a free consultation and discover how much you could be saving on your tax bill.

Don’t let complex tax rules cost you money – let our experts handle your home office expenses and tax planning needs.