As s sole trader in the UK, the line between home and work is becoming increasingly blurred. Whether you have a dedicated home office or you work from your kitchen table. It is important to know that you can claim a portion of your household running costs as a business expense. This helps to reduce your taxable profit and, therefore, the amount of tax you pay.
However, this is an area that many new business owners find confusing. How do you work out how much you can claim? This guide is written to explain the methods you can use to claim for working from home as a sole trader.
Method 1: Use HMRC’s Simplified Expenses (The Flat Rate)
By far the easiest way to claim for working from home is to use HMRC’s simplified expenses. This is a flat rate that you can claim based on the number of hours you work from home each month. You do not need to provide any receipts or do any complex calculations.
The current flat rates are:
- £10 a month for 25 to 50 hours of work from home.
- £18 a month for 51 to 100 hours of work from home.
- £26 a month for 101 or more hours of work from home.
For example. If you work more than 101 hours from home every month for a full year, you can claim a total of £312 (£26 x 12) as a business expense.
This method is very simple, but it may not give you the maximum tax relief you are entitled to, especially if you have high household bills.
https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home
Method 2: Calculate a Proportion of Your Actual Costs
The second method is to calculate the actual additional costs you have incurred by working from home. This method requires more work, but it often results in a larger expense claim.
To use this method, you need to work out what proportion of your home you use for business and for how long. A common way to do this is based on the number of rooms in your house. For example. If you have a 5-room house and you use one room as your office. You could argue that 1/5th (or 20%) of your household costs are for business.
What costs can you include?
You can include a proportion of your:
- Heating and electricity bills.
- Council Tax.
- Mortgage interest (not the capital repayment part) or rent.
- Home insurance.
- Broadband and phone.
For costs like broadband, if you have a single bill for both personal and business use, you need to work out a reasonable split based on your business usage.
An example calculation:
Let’s say your total annual household bills for the items above come to £10,000. You use one room out of five for your business. This means you can claim 1/5th of your costs as a business expense: £10,000 x 1/5 = £2,000.
This is a much larger claim than the £312 you could claim using the simplified flat rate.
A Note on Capital Gains Tax
It is important to be aware that if you use a part of your home exclusively for business purposes, you may have to pay Capital Gains Tax on that portion of your home when you come to sell it e.g building a off set shed/office in your garden which is not connected to your house’s structure). This is why it is often recommended that your “office” also has some small personal use (e.g., it is also used as a guest room).
When Getting Advice Can Help
Working out how much you can claim for working from home as a sole trader can be a complex calculation. You want to ensure you are claiming everything you are entitled to without falling foul of HMRC’s rules. You are not expected to be a tax expert, and getting professional advice can be very helpful.
If you would like calm, practical support, Penney’s Accountancy works with UK small businesses in and around Farnborough and the surrounding areas. We can help you work out the most tax-efficient way to claim for your home office expenses and ensure your tax return is accurate.
Want to Learn More in Your Own Time?
For those who want to build their confidence and understand these topics in more detail, Penney’s Finance School offers an online, self-paced business and finance course. It covers everything from company setup to cash flow, being a sole trader and tax, allowing you to learn at your own pace.
Important information
The information provided in this article is intended as general guidance for UK businesses only and reflects UK tax legislation and HMRC guidance as of February 2026.
Tax rules and business requirements can change, and individual circumstances vary. Before acting on any of the information above, we recommend speaking to a qualified accountant who can provide advice tailored to your specific situation.