Working from Home — Tax Relief for UK Business Owners 2026

Millions of self-employed people and limited company directors run their business from home. HMRC allows you to claim a proportion of your household running costs as a tax-deductible business expense — but the rules differ depending on whether you are self-employed, a company director, or an employee working from home for an employer.

The £6/Week HMRC Flat Rate (Simplified Expenses)

The simplest option for sole traders and partnerships is the simplified expenses flat rate, introduced to remove the need for detailed apportionment calculations. For 2025/26 the rates are:

Hours worked from home per month Monthly flat rate Annual equivalent
25 – 50 hours £10 £120
51 – 100 hours £18 £216
101 hours or more £26 £312
Note: The widely-quoted "£6 per week" figure (£312/year) is the highest HMRC simplified rate, applicable when you work from home for 101 or more hours per month. Many people quote this as a general figure, but you can only use it if you genuinely meet that threshold.

You simply record the flat-rate amount in your accounts — no receipts or utility bills required. You cannot, however, also claim the actual costs on top of the flat rate; it is one or the other.

Claiming Actual Costs Instead

If your home running costs are high, claiming actual costs on a proportionate basis will almost always produce a larger deduction than the flat rate. The method requires more record-keeping but is perfectly straightforward.

How to Calculate Your Claim

Work out what fraction of your home is used for business and for how long:

  1. Number of rooms used exclusively or partly for business — divide by the total number of rooms in the property.
  2. Time proportion — if a room is used for both personal and business purposes, apply a further time-based fraction (e.g. a study used for business 40% of the time).
  3. Multiply that combined fraction by each relevant household cost.

Allowable household costs typically include:

  • Heating and electricity
  • Broadband (business proportion)
  • Telephone line rental and calls (business proportion)
  • Rent (if you rent your home)
  • Mortgage interest — only the interest element, not capital repayment
  • Council Tax
  • Water rates
  • Buildings and contents insurance
  • Cleaning costs
Exclusive use warning: HMRC requires that any room claimed must be used wholly and exclusively for business — at least during the period claimed. A kitchen table where you occasionally open a laptop is unlikely to qualify for full proportionate claim; a dedicated study used solely as an office qualifies in full.

Capital Gains Tax Implications

This is the most misunderstood risk of working from home as a business owner. Your main private residence normally benefits from Private Residence Relief (PRR), which means any gain on sale is entirely free of Capital Gains Tax (CGT). However, if part of your home has been used exclusively for business — and you have claimed tax relief on that basis — HMRC may deny PRR on that proportion of the property when you sell.

How to Avoid a CGT Problem

  • Avoid exclusive use. If a room is also used personally (even occasionally), full PRR should be preserved. Many accountants advise keeping a sofa or personal items in a home office for this reason.
  • Use the flat rate. Claiming the simplified flat rate does not trigger any CGT restriction because you are not asserting exclusive business use of any part of the property.
  • Seek professional advice before selling if you have historically claimed large actual-cost deductions based on exclusive use of a room.
Important: The CGT risk applies to exclusive use claims. Mixed-use rooms claimed on a time/proportion basis generally do not trigger a CGT restriction, but document your position carefully and discuss with a qualified accountant.

Limited Company Directors

If you operate through a limited company, the company — not you personally — pays the bills. You cannot simply claim household costs through the company in the same way a sole trader can. Instead, there are two main options:

Option 1: Charge the Company a Rental Fee

You can enter into a formal licence agreement granting the company the right to use part of your home. The company pays you a licence fee, which it deducts as a business expense. You receive the income personally and must declare it on your Self Assessment return — though you can offset the equivalent household costs against it, often resulting in a nil or small personal tax liability.

Option 2: HMRC Flat Rate Reimbursement

Your company can reimburse you £6 per week (£26/month) free of tax and NIC under HMRC's use of home allowance for employees. As a director you are also an employee, so this applies to you. The payment is a deductible company expense, and you do not pay Income Tax or NIC on it.

Method Annual deduction (approx.) Admin required
£6/week HMRC flat rate £312 Minimal — just process through payroll/expenses
Licence agreement (actual costs) Varies — potentially £1,000+ Formal agreement, Self Assessment declaration

Employees Working from Home

If you are an employee (including a director on PAYE) and your employer does not reimburse your home working costs, you may be able to claim tax relief directly from HMRC. The rules changed significantly from April 2022:

  • From 2022/23 onwards, HMRC reverted to the pre-pandemic rules: you must work from home because your job requires it, not merely because it is convenient or your employer offers a hybrid arrangement.
  • If you qualify, you can claim the £6/week flat rate (£312/year) or the actual additional costs you have incurred, whichever is higher.
  • Claims are made via Self Assessment or by contacting HMRC to adjust your tax code.
Post-pandemic note: The temporary COVID-19 relaxation that allowed all employees to claim for any period of home working ended on 5 April 2022. If you filed claims for 2022/23 or later without genuinely meeting the "required by job" test, you should review those returns.

What You Cannot Claim

There are several costs that HMRC will not allow, regardless of your business structure:

  • Mortgage capital repayments — only the interest element of a mortgage is potentially deductible, and only for sole traders/partnerships using actual costs.
  • The full cost of a room if it is not exclusively used for business.
  • Costs that are not additional — if your broadband bill would be identical whether or not you worked from home, the business element is the incremental cost only.
  • Personal expenditure mixed into a business claim without apportionment.
  • Decorating or furnishing a home office — these are capital items; you may be able to claim Annual Investment Allowance or capital allowances instead.

Record-Keeping Tips

Whether you use the flat rate or actual costs, good records protect you in the event of an HMRC enquiry:

  • Keep utility bills, mortgage statements, and broadband invoices for at least six years.
  • Note the number of rooms in your home and which are used for business, and document any change in use.
  • If you are a company director using a licence agreement, keep a signed copy of the agreement and evidence of payments made.
  • Record hours worked from home each month if using the simplified flat-rate tiers.
Quick summary: Most self-employed people working primarily from home will benefit from claiming actual costs rather than the £6/week flat rate. However, use the flat rate if you want simplicity and to avoid any CGT exposure on your home. Company directors should at minimum claim the £6/week reimbursement through the company — it is simple, tax-free, and costs the company only its Corporation Tax saving.

Tax rules change regularly. Always verify current rates and thresholds on GOV.UK or speak to a qualified UK accountant before filing your return.

Frequently Asked Questions

Using HMRC's flat rate: £10/month for 25–50 hours business use, £18/month for 51–100 hours, or £26/month for 101+ hours — no receipts needed. Alternatively, claim a proportionate amount of actual household costs (internet, heating, electricity) based on rooms used and hours worked.

Only the interest element of mortgage payments, not the capital repayment. And only a proportionate amount based on your business use. Council tax and general home insurance are not allowable expenses for home-working sole traders.

If you use a room exclusively for business — never for personal use — HMRC may treat that proportion of your home as business premises, which could reduce your Private Residence Relief on sale. To avoid this, ensure rooms are used for mixed purposes (business and personal) rather than exclusively for business.

£6 per week (£26 per month) without needing to provide receipts or evidence of actual costs. This HMRC-approved amount can be paid by an employer to an employee or by a limited company to a director. Employees required to work from home can also claim this directly from HMRC if their employer does not pay it.

In the vast majority of cases, no. HMRC and local councils generally leave residential properties assessed for council tax only if business use is incidental to domestic use. Business rates may apply only if you use part of your home exclusively for business AND clients visit your premises regularly.