If you're a UK sole trader who works from home — even occasionally for admin, invoicing, or quoting — you can claim a portion of your household running costs as a business expense. HMRC offers two methods. Picking the wrong one is the most common under-claim for solo businesses.
Two methods, you choose
HMRC accepts either approach but you must use the same method consistently within a tax year. You can switch between methods year to year without notification.
- Simplified flat rate. Fixed monthly amounts based on the hours you work from home. No receipts required.
- Actual costs. A reasonable apportionment of your real household running costs (mortgage interest or rent, council tax, utilities, internet, repairs).
You cannot claim both methods, and you cannot mix them within a single tax year. A surprising number of sole traders claim the simplified rate and a portion of broadband on the same return — both deductions get questioned.
Method 1 — Simplified flat rate
The flat-rate amounts (current as of April 2026):
Hours include any time spent working at home on the business — admin, invoicing, calls, planning, reading trade emails. They don't have to be in a dedicated room. They don't have to be uninterrupted.
You can claim a different band each month — track honestly:
- Quiet month (35 hours admin) → claim £10 that month
- Busy quarter-end month (80 hours quotes + invoicing + filing) → claim £18 that month
- Full work-from-home month (200 hours) → claim £26 that month
Maximum annual claim under simplified: £312(£26 × 12). Most sole traders working part-time from home land between £120 and £216 per year.
What simplified covers
- A share of light, heat, and power
- A share of broadband (the running cost portion, not the line rental separately)
- A share of council tax
- The general "wear and tear" of using your home for work
It does not cover phone calls — claim mobile/landline business calls separately on top.
Method 2 — Actual costs
Apportion real household running costs by space and time. The formula HMRC accepts is:
Allowable expense = household cost × (rooms used / total rooms) × (business hours / 24h)
The "total rooms" denominator excludes hallways, bathrooms and kitchens (HMRC's published guidance).
What you can apportion
- Heating and lighting. Gas/electricity bill × room ratio × time ratio
- Council tax. Same formula. Note: claiming reduces your home's "wholly residential" status — speak to a tax adviser if your local council is strict
- Rent. If you rent, a share of rent is claimable. Mortgage capital repayments aren't — only mortgage interest
- Internet. Business-use percentage (often 20–50% for a sole trader)
- Repairs and decorations. If specifically for the work area
- Insurance. A share of contents insurance covering business equipment
What you can't apportion under actual costs: anything you'd pay regardless of having a business (TV licence, water rates in most cases). And nothing on items used for personal use only.
Which method wins for you
Run both calculations in your head. Three rules of thumb:
- Working from home <100 hours/month? Simplified almost always wins after factoring in your time spent calculating actual costs.
- Working from home full-time, in a small flat with high bills? Actual costs likely wins — your apportioned share could exceed £312/year easily.
- Working from home full-time, in a four-bed house? Actual costs may not beat simplified because your room ratio shrinks.
Three worked examples
Example 1: Plumber doing evening admin
Mark works on jobs all day and does paperwork (invoicing, quoting, scheduling) at home each evening — about 8 hours a week, 35 hours/month consistently.
- Simplified: 35 hrs/month × £10/month × 12 = £120
- Actual costs: Apportioning his utility bills + broadband would be ~£60–£90/year, plus an hour of his time monthly to maintain
Simplified wins easily.
Example 2: Freelance designer working from home full-time
Aisha works from her bedroom (also has a sofa bed for guests) full-time — ~160 hours/month. Her flat: 4 rooms (bedroom, second bedroom-office, kitchen, bathroom — only 2 count as "rooms" for HMRC). Annual gas £900, electricity £700, broadband £360, council tax £1,200.
- Simplified: £26 × 12 = £312
- Actual costs: (£900+£700+£1,200) × (1/2) × (160h/720h available monthly) = £2,800 × 0.5 × 0.222 = ~£311
Roughly the same. Simplified wins on time saved. If she added a portion of broadband (it's already included in simplified, so add only the specifically business-attributed portion), she could push actual costs over £400.
Example 3: Consultant in a four-bed house
Sam, a consultant working from a dedicated home office, ~100 hours/month. Five rooms (4 bedrooms + living room — 5 count). Annual utilities + council tax: £3,200.
- Simplified: £26 × 12 = £312
- Actual costs: £3,200 × (1/5) × (100h/720h) = ~£89
Simplified wins by 3.5×. The "small share of a big house" maths works against actual-cost claims. Most consultants in family homes are better off on the flat rate.
Common mistakes that trigger HMRC enquiries
- Claiming a percentage of mortgage capital. Only the interest is allowable. Capital repayments build equity in your asset.
- Apportioning by floor area only. HMRC expects both space and time apportionment.
- Including bathrooms and kitchens in the room count. They're excluded from the denominator.
- Mixing simplified and actual within a year. Pick one.
- Claiming 100% business use of broadband. Almost never plausible for a sole trader. Net it down to a defensible business percentage.
- Using the 'dedicated room' approach without considering CGT. See the Capital Gains warning above.
Your checklist
- Track home-working hours each month — anything for the business counts.
- Default to simplified for the first year. It's easy and almost always optimal for part-timers.
- Once a year, do a back-of-envelope actual-costs calculation. If it beats simplified by more than £100, switch next year.
- Keep one folder of utility bills + broadband bills, just in case.
- Never claim mortgage capital, fines, or 100% of any household bill.
- If you use a fully dedicated room, plan for the CGT implication when you eventually sell.