Working from Home Tax Relief and Expenses
Updated August 2026
Working from home is now commonplace, whether you are self-employed, run your own limited company or work for an employer.
However, the amount that can be claimed for working from home, and how it should be claimed, depends considerably on how you work.
In particular, the rules for a sole trader are very different from those applying to an employee or director of a limited company.
There was also an important change from 6 April 2026: employees can no longer claim tax relief themselves for unreimbursed additional household expenses incurred from working at home. Employers can, however, continue to reimburse qualifying homeworking costs tax-free.
This guide explains the current rules as follows:
Working From Home if You Are Self-Employed
Employees Working From Home
Limited Company Directors Working From Home
Computers, Desks and Other Home Office Equipment
Capital Gains Tax When Working From Home
Could Working From Home Create Business Rates?
What Records Should You Keep?
Working From Home if You Are Self-Employed
A sole trader who uses their home for their business can normally claim a deduction for an appropriate proportion of the costs of doing so.
There are broadly two ways of calculating the deduction:
use HMRC's simplified expenses; or
calculate the actual business proportion of the household expenses.
Simplified expenses are available to qualifying unincorporated businesses rather than limited companies. They can also be available to partnerships consisting entirely of individuals.
Option 1: Simplified Expenses for Sole Traders
Under the simplified expenses method, a fixed monthly deduction is calculated according to the number of hours spent carrying out qualifying business activities from home.
The current rates are:
Business use of the home of 25 to 50 hours = Monthly deduction of £10
Business use of the home of 51 to 100 hours = Monthly deduction of £18
Business use of the home of 101 hours or more= Monthly deduction of £26
You must therefore work from home for at least 25 hours in a month before a simplified expenses deduction is available for that month. Qualifying activities can include providing goods or services, maintaining business records, marketing and obtaining new business.
At the maximum rate, the annual simplified deduction would therefore be £312 if the conditions were met throughout the year.
It is important to appreciate that £312 is a tax deduction (i.e. treated as a business expense), rather than £312 being refunded to you. The actual tax saving depends upon your taxable profits and personal tax position.
What does the flat rate cover?
The simplified flat rate is intended to cover household running costs, avoiding the need to calculate the precise business proportion of costs such as heating and electricity.
However, using the simplified rate does not necessarily mean that every other home-related expense is lost.
HMRC's detailed guidance confirms that an identifiable business proportion of fixed household costs such as Council Tax, insurance and mortgage interest may still be deductible in addition to the simplified amount. Telephone and broadband costs are also outside the flat rate and the appropriate business proportion may be claimed separately.
For somebody renting their home, an appropriate business proportion of rent may also potentially form part of the homeworking calculation under the normal rules.
The simplified method is convenient, but it is not necessarily the method that produces the largest deduction.
Option 2: Claiming Actual Homeworking Costs
Instead of using simplified expenses, a sole trader can calculate the actual proportion of household expenditure attributable to the business.
Potential expenses include an appropriate proportion of:
Council Tax;
rent;
mortgage interest, although not capital mortgage repayments;
home insurance;
general repairs and maintenance;
heating;
electricity;
cleaning;
water costs, where there is genuine additional business usage; and
telephone and broadband costs.
HMRC distinguishes broadly between fixed costs, which exist regardless of how much the property is used, and running costs that vary according to use.
Only the business proportion is deductible.
How Do You Calculate the Business Proportion?
There is no single percentage that applies to everybody.
HMRC's guidance says a reasonable apportionment should reflect the underlying facts. Relevant factors can include:
the proportion of the property used for business;
the amount of time it is used for business rather than privately; and
the actual level of consumption, particularly for costs such as gas, electricity and water.
Depending upon the property, dividing costs according to the number of rooms may be reasonable. In other cases, floor area will produce a more accurate result.
A further adjustment may then be needed where the room also has private use.
For example, someone using a spare bedroom as an office during normal working hours but using it privately during evenings and weekends should not normally claim the same proportion as somebody using dedicated commercial premises within their home throughout the day and night.
Different expenses can also justify different methods of apportionment. Electricity used to power computers and other equipment, for example, may not necessarily follow exactly the same proportion as Council Tax.
The important point is that the calculation should be reasonable, supportable and consistent with what actually happens.
Simplified Expenses or Actual Costs - Which Is Better?
There is no universal answer.
The simplified method requires relatively little administration and can be useful where homeworking costs are modest.
Where someone works predominantly from home, has a dedicated working area or has significant household costs, calculating actual expenditure can produce a substantially different result.
It is therefore worth comparing the two approaches rather than automatically assuming the simplified rate is best.
Employees Working From Home
The rules for employees are considerably more restrictive than the rules for sole traders.
From 6 April 2026, an employee cannot claim Income Tax relief personally for additional household expenses that they incur while working from home.
This applies even where the expenses are genuinely incurred in carrying out their employment duties.
Employees can still potentially make claims relating to earlier tax years under the rules that applied at the time. HMRC currently allows qualifying claims to be made in respect of the previous four tax years.
The position is different where the employer reimburses the employee.
Tax-Free Homeworking Payments From an Employer
An employer can make tax-free payments towards reasonable additional household expenditure incurred by an employee who regularly works from home under a homeworking arrangement.
There needs to be an arrangement between employer and employee, and the employee must regularly work at home under that arrangement.
This can include hybrid and flexible working arrangements. An informal situation where an employee simply takes work home occasionally does not normally qualify.
HMRC permits an employer to pay:
£6 per week, or
£26 per month for monthly paid employees
without the employer having to substantiate the precise amount of additional expenditure.
These rates have applied since 6 April 2020.
Can an Employer Pay More Than £6 Per Week?
The £6 weekly figure is a guideline rate rather than an absolute maximum.
An employer can reimburse a greater amount tax-free if the payment represents reasonable additional household expenses and there is sufficient evidence to support the calculation.
This could be based on an agreed scale rate supported by evidence, or reimbursement of the employee's actual additional costs.
Where amounts above the guideline rate are reimbursed, appropriate records should therefore be retained.
Which Household Costs Can an Employer Reimburse?
Qualifying additional expenditure can potentially include increased:
heating;
lighting;
metered water usage;
internet charges;
home contents insurance; and
business telephone calls.
The key word is ‘additional’. Costs which would have been incurred anyway, regardless of whether the employee worked from home, do not qualify under this exemption. Examples include ordinary rent, mortgage interest, Council Tax and standard water rates. Office equipment is considered separately from household running expenses.
Limited Company Directors Working From Home
A director of a limited company is not treated in the same way as a sole trader.
The company is a separate legal entity and a director is normally treated as an office holder/employee for these purposes.
Consequently, a director cannot simply deduct a percentage of their personal household bills from the company's profits in the same way that a sole trader can.
For many owner-managed companies, the simplest option is for the company to reimburse the director under the homeworking rules.
Provided the necessary homeworking arrangement exists, the company can pay the director £6 per week or £26 per month towards additional household expenses without detailed evidence of the underlying expenditure.
For an owner-managed company, it is sensible to document the homeworking arrangement, for example through the company's employment records, a homeworking policy or an appropriate board minute.
What if the Director's Actual Costs Exceed £6 Per Week?
The company is not restricted to the £6 weekly amount.
If a director incurs higher qualifying additional household expenditure, the company can potentially reimburse the actual amount, provided there is evidence supporting how the figure has been calculated.
However, ordinary fixed costs such as mortgage interest, rent and Council Tax are not additional household expenditure for the purposes of the employer homeworking exemption.
Where a director wants the company to contribute towards the fixed cost of providing part of their home to the business, a different arrangement may need to be considered.
Charging Your Limited Company Rent
In some circumstances, a director or shareholder can enter into a formal agreement allowing their company to use part of their home and charge the company an appropriate commercial rent.
This is a different arrangement from the £6-per-week homeworking reimbursement.
A properly structured arrangement can allow the company to pay for its use of the premises, but the consequences need to be considered on both sides.
The rent received by the homeowner is potentially taxable property income personally. Related allowable expenses may be deductible in calculating the taxable rental profit, depending upon the circumstances.
A particularly important point for owner-managed businesses is that the normal £1,000 property income allowance is not available where the relevant property income includes a payment from a close company and the individual is a participator in that company, or an associate of a participator.
The agreement and rental figure should therefore be considered carefully rather than simply choosing an arbitrary amount to extract money from the company.
Other matters such as the homeowner's mortgage terms, tenancy agreement, insurance and possible business-rates implications should also be considered.
In addition, renting part of the home to the company would naturally highlight the issues outlined in the ‘Capital Gains Tax When Working From Home’ section below. This is only when the home is owned by the director, of course.
For most directors with relatively modest homeworking costs, the administrative simplicity of the £6 per week employer reimbursement rules are usually preferable. A rental arrangement becomes more relevant where there is significant and identifiable business use of the home.
Computers, Desks and Other Home Office Equipment
The cost of office equipment should generally be considered separately from the household use-of-home calculation.
For employees and directors, an employer can normally provide equipment, services and supplies needed for homeworking without a taxable benefit arising where they are provided for business purposes and any private use is insignificant. Examples can include computers and other necessary office equipment.
For sole traders, business equipment is likewise considered separately from the household homeworking allowance and the appropriate tax treatment will depend upon the nature of the expenditure and the business's accounting basis.
Capital Gains Tax When Working From Home
Homeowners should also consider the Capital Gains Tax implications of business use.
Private Residence Relief normally protects the gain arising on the sale of someone's main home from Capital Gains Tax, subject to the relevant conditions.
However, if part of the property is used exclusively for business purposes, the proportion of the gain attributable to that part can fall outside Private Residence Relief.
This is different from simply using a spare bedroom or study as an office.
HMRC specifically confirms that using a room as a temporary or occasional office does not in itself amount to exclusive business use.
Where a room has genuine domestic use as well as business use, the risk of a restriction to Private Residence Relief is therefore generally reduced.
Care should nevertheless be taken before designating part of a property exclusively to a business, particularly where substantial expenses or rent are being claimed for that area.
Could Working From Home Create Business Rates?
Using a small part of a home as an office will not usually result in business rates.
Business rates can become relevant, however, where part of the property has effectively become separate business premises, customers visit the property, employees work there or significant alterations have been made for the business.
The circumstances should therefore be reviewed where home business use goes beyond an ordinary home office.
What Records Should You Keep?
For a self-employed person using simplified expenses, records should be retained showing the number of qualifying hours worked from home each month.
Where actual expenses are claimed, household bills and details of the method used to calculate the business proportion should be retained.
For employees and company directors receiving more than HMRC's £6-per-week guideline amount, evidence of the actual additional household costs and the calculation supporting the reimbursement should be retained.
Where a company pays rent for the use of a director's home, a properly prepared agreement and evidence supporting the commercial rental amount should also be retained.
Good records are particularly important where the business use of the property or the amount being claimed is significant.
In Summary
The correct treatment of working-from-home expenses depends primarily upon how you operate.
Sole Traders - sole trader can generally choose between simplified expenses and claiming an appropriate proportion of actual household expenses.
Employees - An employee can no longer claim personal tax relief for homeworking household costs from 6 April 2026, although an employer can still reimburse qualifying additional costs tax-free.
Company Directors - A limited company director falls within the employee rules rather than the sole-trader rules. The company can normally make a qualifying homeworking payment of £6 per week or £26 per month, and can potentially reimburse higher actual additional costs where these can be substantiated.
Where a director wants their company to contribute towards the fixed costs of providing part of their home to the business, a formal rental arrangement may sometimes be appropriate, but the personal tax, Capital Gains Tax and other consequences should be considered before putting one in place.
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Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.