A Guide to Working from Home Tax Relief and Allowances

Working from home is no longer a perk or an accident of lockdown — it's a fact of life for millions of UK small-business owners, freelancers, and remote workers. What's less obvious is that a chunk of your household costs can legally come off your tax bill.

The rules vary depending on whether you're self-employed, running a limited company, or working from home for an employer, and the amounts can be surprisingly meaningful. This guide to working from home tax relief covers what you can claim, how to calculate it, and the records your tax authority expects to see.

Who Can Claim Home Office Tax Relief?

Self-employed and sole traders

If you work from home regularly as part of your self-employment — whether full-time or split between home and other locations — you can claim a proportion of your household running costs as a business expense. HMRC is broadly permissive here; the threshold is simply that you must work from home, not merely choose to.

Directors of limited companies

If you run a limited company and work from home, the business can claim home office expenses either as a reimbursement to you or as an allowable expense against profits. The calculation is the same, but the tax treatment differs slightly depending on how you structure the claim.

Employees working from home

This is where it gets tighter. Employees can claim relief only if they're required to work from home — not choosing to for convenience. The rules are more restrictive than for the self-employed, and the amounts are typically smaller. You may qualify if your employer has no office or if your role is remote-only by contract.

Who cannot claim

You cannot claim if you choose to work from home but could access a provided workplace. The key word is "required." If you simply prefer your kitchen table to the office, HMRC is not interested.

What Costs Can You Actually Claim?

The costs split into two camps: fixed household costs (rent, council tax, insurance) and running costs (heating, electricity, internet). For each, you claim a proportion based on the space used and the time spent working.

Fixed costs — proportional

Rent or mortgage interest — Claim a proportion based on the floor area of your workspace as a fraction of your home. Note: claiming mortgage interest on a room used exclusively for business can trigger a capital gains tax bill when you sell. The safer move is to ensure the room has some personal use too.
Council tax or local property tax — A proportion matching your workspace's share of the home.
Home insurance — The business-use portion of the premium (your insurer can advise on this).

Running costs — proportional or actual

Heating and electricity — The additional energy used to heat and light your workspace during working hours. If you work eight hours a day, five days a week, that's roughly 33% of your weekday usage, though overnight heating still counts as household expense.
Water rates — If you use water for business purposes, a small proportion is claimable (though this is rarely significant).
Internet and broadband — The business proportion of your bill. If you use it primarily for work, a substantial chunk is defensible.
Telephone — If you have a dedicated business line, all of it. If you use your personal line partly for business, claim a reasonable proportion.
Cleaning — If you actively clean your workspace as part of business use, a proportion of cleaning costs or materials is claimable.

Equipment and furniture you can claim immediately

Desk, chair, shelving — Purchased specifically for business use.
Computer, monitor, keyboard, printer — Office technology and peripherals.
Software and subscriptions — Business licences and tools.
Office supplies — Stationery, printer cartridges, storage.

If an item is used partly for personal use, claim only the business proportion. A monitor used 60% for work and 40% for gaming is 60% deductible.

What you cannot claim

Mortgage capital repayments (interest only)
Food and drink (personal expense)
Clothing (unless it's specialist protective equipment)
General home maintenance or repairs unrelated to your workspace
Television, entertainment, or personal subscriptions

Calculating Your Claim: Two Routes

You have two methods. Calculate both and use whichever is larger.

The simplified flat-rate method

HMRC offers a simplified allowance that sidesteps detailed maths. You claim a fixed monthly amount based on hours worked from home:

25 to 50 hours per month: a set rate
51 to 100 hours per month: a higher rate
101+ hours per month: the maximum rate

This is genuinely simple — no bills to dig out, no proportion calculations. The trade-off is that if you work from home full-time in a reasonably sized office, your actual costs almost certainly exceed the flat rate. Check HMRC's simplified expenses checker to see the current monthly amounts.

The actual costs method

This requires more legwork but often yields a bigger claim.

Add up your total household running costs for the year. Utilities, council tax, insurance, rent or mortgage interest, phone, internet, water. Exclude anything you cannot claim (mortgage capital, food, etc.).
Calculate the business proportion. Most people blend two approaches:
- Room-based: If your office is one of five rooms, that's 20% of the home.
- Time-based: If you use that room for business only eight hours a day, five days a week, that's roughly 33% of weekday use. Some accountants multiply these (20% × 33%) for a more conservative figure.
Apply the proportion to each cost. If your utility bills are £1,200 a year and your workspace is 20% of the home (used for business 33% of the time), your claim might be £1,200 × 20% = £240, or £1,200 × 20% × 33% = £79, depending on your approach. Document your reasoning.

Which method wins? Usually the actual costs method for full-time home workers. For part-time or occasional use, the flat rate may be simpler and sufficient.

Record Keeping — Don't Get This Wrong

Records are what separate "legitimate claim" from "optimistic fiction."

For the flat rate method:

A monthly log of hours worked from home
Evidence that you regularly work from home (employment contract, client correspondence, etc.)

For the actual costs method:

Original bills and receipts for every claimed expense
Your written calculation showing how you arrived at the proportion
A description of the space used for business
A log of hours or days worked from home per month

Keep these for at least five years after the tax year in question. If you use accounting software (Relentify's Accounting product can categorise and attach receipts), digitise everything. Spreadsheets work too, but don't rely on memory or a shoebox of receipts.

Common Mistakes That Cost You Money

Claiming a room is exclusively for business

This is tempting because it lets you claim 100% of the running costs for that room. The problem: HMRC may argue that you've lost the main-residence exemption for that portion of your home, and you could face a capital gains tax bill when you sell. The safer approach is to ensure the room has dual use — a bookshelf of personal books, occasional family use — so it remains part of your residence.

Not claiming at all

Many employees and part-time home workers simply don't bother. Even £100 a year or £200 a year adds up, and you're entitled to it. If you work from home, claim it.

Over-claiming

Claiming 50% of your household costs when you work from a corner of the living room invites scrutiny. Your claim should be reasonable and defensible. A proportion of 15–30% of household running costs is typical; 80% for part-time use is a red flag.

Inconsistent record keeping

If you are audited, you must produce records that match your claim. Vague recollection and estimates do not cut it. Digitise and organise by tax year.

Forgetting to claim equipment in the year it's purchased

High-value items (over £2,500) may need to be claimed over several years via capital allowances. Check the rules for your specific items, but claim office furniture and smaller equipment in the year of purchase.

Frequently Asked Questions

Can I claim if I work from home only one day a week?

Yes, if those days are required by your employer or necessary for your self-employed work. You'd likely use the flat rate method (if you meet the hour threshold), or claim a proportion of running costs for that day. Consistency and documentation matter; one day a week is defensible as long as you can evidence it.

Will claiming working from home tax relief trigger a capital gains tax bill when I sell my home?

Only if you claim a room is used exclusively for business. If you claim a proportion of household costs (room-based or area-based, with some personal use), there's no main-residence exemption issue. The safer approach is to document that the space has dual use.

What if my actual costs are higher than the flat rate — can I claim more than the flat rate suggests?

Yes. The flat rate is a simplification option, not a ceiling. If your actual costs are higher and you can evidence them, claim the actual amount. That's why calculating both methods is worthwhile.

Do I need professional accounting software to claim this relief?

No, but it helps. A spreadsheet with receipts attached (scanned or photographed) works fine. Dedicated accounting software makes it tidier and less error-prone, but the substance is the numbers and the receipts.

Can company directors claim this as well as the business?

Yes, if you work from home. You can claim either a personal tax return (as an employee of the company) or the company can reimburse you for costs. Typically, the company claims and reimburses you, which avoids a double deduction. Speak to your accountant if you're running a limited company.

What if I use a spare bedroom that I also rent out on Airbnb some weeks?

This gets complicated. HMRC will ask: is it a business office, a rental space, or a personal bedroom? The dual use is harder to defend. If you're going to claim home office relief, keep that space primarily for business and document it clearly.

How often should I recalculate my claim?

Annually. If your household circumstances change (you move house, work part-time instead of full-time, get a dedicated office), your claim should change too. Review it every tax year and adjust if needed.

Can I backdate a claim if I did not claim before?

Typically, yes — HMRC allows claims for up to four years of prior tax years (sometimes longer). If you've been working from home for three years and never claimed, you can often file an amended return for the previous three years. Check with your accountant; timing and procedure vary.

Making the Most of Your Claim

The effort to claim working from home tax relief is minimal once you have systems in place. Here's how to get it right:

Choose your method. Calculate both (flat rate and actual costs) and use whichever is larger. Stick with it consistently year to year unless your circumstances significantly change.
Track as you go. Don't estimate at tax time. Keep a monthly log of hours or days worked from home, and file receipts as they arrive. Forward each utility bill to a folder labelled by tax year.
Document your space. Take a photo of your office or workspace. Write a brief description (e.g., "dedicated home office, approximately 120 sq ft in a 1,200 sq ft house; used exclusively for business Monday to Friday, 8am–6pm"). This evidence is worth its weight if you're ever questioned.
Review annually. At tax time, revisit your calculation. Have your circumstances changed? Have utility costs risen? Adjust your claim if needed.
Get advice if it's complex. If you run a limited company, have multiple properties, or claim significant amounts, speak to an accountant or tax advisor. A couple of hours of professional time can save you money and headaches.

Working from home tax relief won't make you rich, but it's money you're entitled to. Claim it, document it, and move on. Explore year-end tax saving strategies to see what else you might be missing, or check our guide to co-working versus home office setups if you're deciding between the two.