Working from Home

Two Ways to Claim: Flat Rate vs Actual Costs

HMRC gives you two methods. You can choose whichever saves you more.

Method 1: Simplified Flat Rate (easiest)

If you work from home for at least 25 hours a month, you can claim a fixed amount with no receipts needed:

At the maximum rate, this gives you £312 per year. Simple, but often less than actual costs.

Method 2: Actual Costs (usually saves more)

Calculate the business proportion of your actual household bills. This takes more effort but can be worth significantly more — especially if you have a dedicated office room.

How to Calculate Your Actual Costs

To work out the business proportion of your household bills, use this formula:

(Area of office ÷ Total area of home) × (Hours used for work ÷ Total hours in the period)

For example, if your office is 1 room out of 5 equal-sized rooms, and you use it for work 40 hours out of a 168-hour week:

1/5 × 40/168 = 4.8% of your total household bills

The costs you can apply this percentage to include:

• Electricity
• Gas/heating
• Council tax
• Mortgage interest (not the capital repayment)
• Rent
• Home insurance
• Repairs to shared areas (proportional)

Important: You can claim the flat rate for utilities AND still claim phone/broadband separately. The flat rate only covers gas, electric, and similar utilities.

Capital Gains Tax Warning

One thing to be careful about: if you claim that a room in your home is used exclusively for business, it could affect your Capital Gains Tax (CGT) Principal Private Residence relief when you sell your home.

To avoid this, make sure your office is also used for personal purposes (even occasionally). Don't claim a room is 100% business. A room that's 80% business and 20% personal is perfectly fine and won't trigger CGT issues.