Use of Home as Office in 2026: Working From Home Expenses for Sole Traders and Directors

If you run your business from the kitchen table, a spare bedroom or a converted loft, part of what you spend on your home can come off your taxable profit. This guide explains how use of home as office works for the 2026-27 tax year in 2026: HMRC's flat rates, the more detailed method based on rooms and time, the Capital Gains Tax and business rates traps if you go too far, and the very different rules for limited company directors, including the £6 a week payment. Worked examples are in pounds, and every rule is checked against GOV.UK and HMRC's manuals as of October 2026.

Quick answer

Sole traders can claim a flat rate of £10 a month, £18 a month or £26 a month depending on monthly hours worked at home, or a reasonable share of actual costs (heating, electricity, Council Tax, mortgage interest or rent) split by area and time. Phone and broadband are claimed separately. Limited company directors can be paid £6 a week tax-free by their company instead.

• Flat rate maximum: £312 a year for 101+ hours a month

• Actual costs usually give more if you work full-time from a dedicated room

• A room used only for business can cost you Capital Gains Tax when you sell

• Employees can't claim the £6 a week relief themselves from 6 April 2026

Who can claim and what counts

Use-of-home claims are an allowable expense for sole traders and partners running a trade or profession. The rule underneath is the same one that governs every business expense: a cost has to be incurred wholly and exclusively for the business, and where a cost has a private and a business part, you can claim the identifiable business part. HMRC's Business Income Manual (BIM47820) applies this to the home by splitting your household costs into two kinds.

Fixed costs are what you'd pay whether or not you worked from home: Council Tax, mortgage interest, rent, buildings and contents insurance, water rates and general repairs. They're allowable in proportion to the part of the home set aside for business use and the time it's set aside. Running costs go up because you work at home: heating, lighting and power, cleaning and metered water. They're allowable in proportion to the extra use.

Some things never count. Capital repayments on your mortgage aren't an expense, only the interest. Redecorating a room you don't use for work isn't allowable. You can't claim anything for your home if you've opted for the £1,000 trading allowance instead of expenses, because the allowance replaces all expenses. And a sole trader can't charge their own business rent: you and the business are the same legal person, so there's nobody to pay.

Phone and broadband sit outside both methods. You claim the business share of your actual bills: business calls from itemised bills, and a reasonable split of a broadband package based on how much of its use is for work.

Method 1: HMRC's flat rates (simplified expenses)

Simplified expenses let you skip the maths. You count the hours you spend working at home each month and claim a fixed amount for that month. The flat rate covers household running costs like heat and light; it doesn't cover phone or internet, which you add separately. You can only use it in months where you work 25 hours or more at home.

GOV.UK's own example: someone who works 40 hours a month at home for 10 months and 60 hours a month for 2 months claims (10 × £10) + (2 × £18) = £136 for the year. Someone working at home full-time all year claims 12 × £26 = £312.

Flat rates are open to sole traders and to partnerships with no companies as partners. Limited companies can't use them. You keep a simple record of hours each month, such as a diary or timesheet, so you can show which band you were in. The rates haven't changed for several years, so they're worth most to people who work at home part-time and have modest bills. They can't include a share of Council Tax, mortgage interest or rent at all.

If you live at your business premises, for example running a small B&B or a care home in your own house, there's a separate simplified method. You work out total premises costs and deduct a flat amount for private use: £350 a month a month for one person living there, £500 a month for two and £650 a month for three or more.

Method 2: actual costs, split by area and time

The actual-costs method takes longer, but if you work from home most days in a room that's mostly given over to the business, it usually gives a bigger deduction. HMRC accepts any reasonable method, and the manual examples (BIM47825) use two steps.

Step 1: the area. Work out what share of your home the work space is. You can count rooms, ignoring kitchens and bathrooms if that's fairer, or use floor area. HMRC's GOV.UK example: a four-room home with one room used as an office gives a quarter. On a £1,120 electricity bill, that's £280.

Step 2: the time. If the space is used for business only some of the time, reduce the area figure by the share of time. In GOV.UK's example, working from home one day a week reduces £280 to £40. HMRC's manual takes a slightly finer approach for shared rooms: for fixed costs it uses business hours as a share of all hours (24 a day), because you'd pay those costs anyway, and for running costs like electricity it uses business hours as a share of the hours the room is actually in use.

Working out an actual-costs claim

1. 1

   List the household bills for the year

   Council Tax, mortgage interest or rent, insurance, gas, electricity, water. Leave out mortgage capital repayments.

2. 2

   Find the business share of your home

   Rooms used for work ÷ total rooms, or office floor area ÷ total floor area.

3. 3

   Adjust for time

   Fixed costs × business hours ÷ total hours. Running costs × business hours ÷ hours the room is in use.

4. 4

   Add phone and broadband separately

   Use itemised bills or a reasonable usage split.

   Tip: Keep the workings with your records. HMRC can ask how you reached the figure.

5. 5

   Compare with the flat rate

   Use whichever gives the higher figure for that year, and stay consistent within a year.

Worked example: flat rate vs actual costs

Hannah is a self-employed graphic designer in Manchester and a basic-rate taxpayer. She works from home about 40 hours a week, so every month is in the 101-hours band. Her home has five rooms, not counting the kitchen and bathroom. The smallest bedroom holds her desk and computer, but it doubles as a guest room and her son does homework there, about 10 hours a week in total. Her household bills for 2026-27 are:

• Council Tax £2,000, mortgage interest £4,800, home insurance £300: fixed costs £7,100;
• gas and electricity £2,100: running costs;
• broadband £480, used about half for work; mobile £360, about 60% business.

Flat rate: 12 × £26 a month = £312, plus broadband £240 and mobile £216 = £768.

Actual costs: the office is one room of five, so 20%.

• Fixed costs: £7,100 × 20% = £1,420, then × 40 business hours ÷ 168 hours in a week = £338.10.
• Running costs: £2,100 × 20% = £420, then × 40 business hours ÷ 50 hours the room is in use = £336.00.
• Home costs £674.10, plus broadband £240 and mobile £216 = £1,130.10.

The actual-costs method gives £362.10 more. At 20% Income Tax plus 6% Class 4 National Insurance, that saves Hannah about £94 a year. It's worth doing, but it's not a fortune, and she has to keep the workings. Because the room has regular private use, there's no Capital Gains Tax issue when she sells the house.

If Hannah turned the room into an office used for nothing else, both of her costs would be claimable at the full 20%: £1,420 + £420 = £1,840, about £397 a year less tax and National Insurance than the flat rate. That's where the next section matters.

Hannah's options, 2026-27

	Flat rate	Actual costs, shared room	Actual costs, exclusive office
Home costs claimed	£312	£674.10	£1,840
Plus phone and broadband	£456	£456	£456
Total claim	£768	£1,130.10	£2,296
Tax and NI saved vs flat rate (26%)	–	about £94	about £397
Capital Gains Tax risk on sale	None	None	Yes, on the office's share

Home costs claimed

Flat rate

£312

Actual costs, shared room

£674.10

Actual costs, exclusive office

£1,840

Plus phone and broadband

Flat rate

£456

Actual costs, shared room

£456

Actual costs, exclusive office

£456

Total claim

Flat rate

£768

Actual costs, shared room

£1,130.10

Actual costs, exclusive office

£2,296

Tax and NI saved vs flat rate (26%)

Flat rate

–

Actual costs, shared room

about £94

Actual costs, exclusive office

about £397

Capital Gains Tax risk on sale

Flat rate

None

Actual costs, shared room

None

Actual costs, exclusive office

Yes, on the office's share

Capital Gains Tax: the exclusive-use trap

Your main home is normally free of Capital Gains Tax when you sell it, thanks to private residence relief. But section 224 of the Taxation of Chargeable Gains Act 1992 takes relief away from any part of the home used exclusively for a trade or business. HMRC's Capital Gains Manual (CG64663) explains how strictly that's read:

• a room used partly for business and partly for living keeps full relief;
• HMRC doesn't usually restrict relief for a room that has some regular private use;
• very minor private use, such as keeping a few personal items in a room, doesn't stop the use being exclusive;
• where there is exclusive use, the share of the gain that loses relief is decided on the facts, not simply by copying the fraction you used for Income Tax.

So the claim that gives the biggest Income Tax deduction, a room used solely for business, is also the one that can create a CGT bill later. As an illustration only: if Hannah's house rose in value by £150,000 while she owned it and HMRC agreed that one fifth of the gain related to an exclusive office, £30,000 would lose relief. After the £3,000 annual exempt amount, £27,000 would be taxed at 18% or 24% depending on her other income, up to £6,480. Over 15 years of exclusive-use claims she'd have saved roughly the same amount in Income Tax and National Insurance, so the trade-off isn't obviously worth it.

The simple fix is genuine mixed use. A spare room that's also where guests sleep, where the family's printer lives or where the children study isn't used exclusively for business, and you can still claim a time-based share of costs.

Business rates and other side effects

Working from home doesn't usually make you liable for business rates. GOV.UK says you generally won't pay them if you use a small part of your home, such as a bedroom office, or if you sell goods by post. You may need to pay business rates on part of the property, as well as Council Tax on the rest, if:

• the property is part business and part domestic, such as living above a shop;
• you sell goods or services to people who visit;
• you employ people to work there;
• you've altered the home for the business, such as turning a garage into a hair salon.

The Valuation Office Agency (in England and Wales), the local assessor in Scotland or Land & Property Services in Northern Ireland decides. If a home-based studio or treatment room is assessed, it may still qualify for small business rate relief; our business rates guide explains how bills are worked out.

Other checks are outside tax law but worth a few minutes: tell your home insurer you work from home, because standard policies often exclude business equipment or visitors; and if you rent, check that your tenancy allows it.

Limited company directors: the £6 a week route

If you trade through a limited company, the sole-trader methods above don't apply. You're an employee of your company, and the company is a separate legal person, so there are two ways to cover home costs.

Homeworking payment of £6 a week

An employer can pay an employee who regularly works at home under homeworking arrangements £6 a week, or £26 a month for monthly-paid staff, without the employee having to prove their extra costs. That's been the rate since 6 April 2020, under HMRC's Employment Income Manual (EIM01476). The payment is free of Income Tax and National Insurance for you and is an expense for the company, so it reduces Corporation Tax. Over a year that's £312. The company can pay more, but only if it can show the higher figure reflects actual extra household costs, using records you keep.

This is different from the employee tax relief many people used to claim from HMRC directly. GOV.UK confirms that from 6 April 2026, employees can't claim tax relief for working from home themselves. Claims for the 4 previous tax years are still possible if you qualified at the time. Employer payments under EIM01476 are unaffected, so for a director the company payment is now the main option.

Charging the company for use of your home

Some directors instead have the company pay a fee for using part of their home, under a written agreement at a commercial rate. The company deducts it for Corporation Tax if it's wholly and exclusively for the business. You report it on your own tax return as property income and can deduct the matching share of household costs. Two points make this less generous than it first looks:

• you can't use the £1,000 property allowance against it, because GOV.UK excludes income from a company you or a connected person owns or controls;
• a formal arrangement for exclusive use of a room can bring in the same Capital Gains Tax and business rates questions covered above, which is why advisers commonly use a licence for use at set times rather than a lease of a dedicated space.

For most one-person companies, the tax-free £6 a week payment is simpler. A rent arrangement makes sense mainly when your genuine home office costs are well above £312 a year. Our guide to director salary vs dividends covers how this fits with how you pay yourself.

Records to keep

Whichever method you use, keep enough to show HMRC how you reached the figure:

Use-of-home records

0/6

• Monthly log of hours worked at home (needed for the flat rate)
• Household bills for the year: Council Tax, energy, insurance, water
• Mortgage statement showing interest separately from capital, or tenancy agreement
• A note of rooms or floor area and how you split time
• Itemised phone bills or a reasonable broadband usage estimate
• For directors: the homeworking arrangement or written licence and company payment records

Share Print

Keep the records for at least 5 years after the 31 January filing deadline for that tax year if you're a sole trader. If HMRC asks, a short note explaining your method usually settles it.

Common mistakes

• Claiming the whole of a bill. Only the business share is allowable, under either method.
• Including mortgage capital. Only interest counts.
• Using the flat rate and also claiming energy bills. The flat rate replaces household running costs; only phone and internet go on top.
• Claiming home costs with the trading allowance. You can't do both.
• Declaring a room "business only" without thinking about CGT. It can cost more later than it saves now.
• Directors still claiming £6 a week from HMRC. That route closed for 2026-27; the company has to make the payment.
• Not comparing methods. For part-time home working the flat rate often wins; for full-time work from a dedicated room, actual costs usually do.

Official links

• Simplified expenses: working from homeFlat rates by hours
• Expenses if you're self-employed: working from homeProportion method
• BIM47825: use of home examplesArea and time apportionment
• CG64663: exclusive business usePrivate residence relief
• Business rates: working at homeWhen rates apply
• EIM01476: homeworking payments£6 a week employer payment

What to do next

Add up last year's household bills, then run both methods for your own home. If the actual-costs figure is only a little higher than the flat rate, the flat rate may be worth the saved effort. If you're not yet registered with HMRC, start with our sole trader registration guide, and see the full list of allowable expenses for everything else you can claim. To see what the saving means for your overall bill, use our guide to calculating self-employed tax.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

How much can I claim for use of home as office?

Sole traders can use HMRC's flat rate: £10 a month for 25 to 50 hours of home working in a month, £18 a month for 51 to 100 hours and £26 a month for 101 hours or more, so a maximum of £312 a year. Or claim a reasonable share of actual household costs, split by area and time. Phone and broadband go on top at their business share.

Can I claim mortgage interest and Council Tax when working from home?

Yes, under the actual-costs method, but only the business share. Work out the part of your home used for business (by rooms or floor area) and the share of time it's used for work. Capital repayments on a mortgage are never allowable; only the interest is. These fixed costs aren't claimable under the flat-rate method.

Will using a room as an office affect Capital Gains Tax when I sell my home?

Only if part of the home is used exclusively for business. HMRC's Capital Gains Manual (CG64663) says a room with some regular private use keeps full private residence relief. A room set aside solely for business can lose relief on its share of the gain. Mixed use, such as an office that's also a guest room, avoids the problem.

Do I have to pay business rates if I work from home?

Usually not. GOV.UK says you don't normally pay business rates if you use a small part of your home, such as a bedroom office, or sell goods by post. You may need to if customers visit, you employ people there, part of the property is clearly business premises, or you've altered your home for the business.

Can my limited company pay me for working from home?

Yes. Your company can pay you £6 a week (£26 a month if paid monthly) tax-free and free of National Insurance for regular homeworking, with no receipts needed, and deduct it for Corporation Tax. It can pay more if you can evidence the extra costs. Some directors instead charge the company a fee for using part of the home, which is taxable as property income.

Can employees still claim the £6 a week working from home relief?

Not for 2026-27. GOV.UK says that from 6 April 2026 employees can't claim tax relief for working from home themselves. You can still claim for the previous 4 tax years if you qualified. Employers can still pay £6 a week tax-free under a homeworking arrangement.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 12 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Simplified expenses if you're self-employed: working from home — HMRC / GOV.UK · accessed 12 October 2026
2. 2.Expenses if you're self-employed: working from home — HMRC / GOV.UK · accessed 12 October 2026
3. 3.BIM47820 — Use of home: overview — HMRC Business Income Manual · accessed 12 October 2026
4. 4.BIM47825 — Use of home: examples — HMRC Business Income Manual · accessed 12 October 2026
5. 5.CG64663 — Private residence relief: part of house used exclusively for business — HMRC Capital Gains Manual · accessed 12 October 2026
6. 6.Business rates: working at home — GOV.UK · accessed 12 October 2026
7. 7.EIM01476 — Homeworking: additional household expenses — HMRC Employment Income Manual · accessed 12 October 2026
8. 8.Claim tax relief for your job expenses: working at home — HMRC / GOV.UK · accessed 12 October 2026
9. 9.Tax-free allowances on property and trading income — HMRC / GOV.UK · accessed 12 October 2026
10. 10.Capital Gains Tax rates and allowances — GOV.UK · accessed 12 October 2026