4 September 2026 · 6 min read · Bruce Thomas
Most owner-managed businesses run at least partly from home, and the claim is often either forgotten or done in a way that is hard to defend. The right approach depends on whether you trade as a sole trader or through a company — they are not the same.
Sole traders: simplified expenses
The simplest route is HMRC's flat rate based on the number of hours a month you work from home. It requires no bills, no calculations and no floor-area measurements — just an honest record of hours. It is modest, but it is quick and it is very hard to argue with.
Sole traders: the proportional method
If you use a dedicated room regularly, apportioning your actual household costs usually gives a bigger claim. Take the costs that vary with use or relate to the whole property, then apportion by rooms used and time used.
- Included: heating, electricity, metered water, rent, mortgage interest (not capital), council tax, home insurance
- Apportion by the number of rooms used for business and the proportion of time they are used for it
- Keep the calculation written down once and reuse it — it is the working, not the number, that HMRC asks for
- Avoid using a room exclusively for business if you may later sell the house, as it can affect private residence relief
Directors are different
A company cannot simply pay a share of your household bills without consequences. The usual routes are a small fixed homeworking allowance paid tax free where you work from home under a homeworking arrangement, or a formal licence agreement under which the company pays you rent for the space.
Rent is the larger claim but it is rental income in your hands, so it has to be reported on your Self Assessment and set against the related costs. It is worth doing properly, with a written agreement, or not at all.
Broadband, phones and equipment
- A mobile contract in the company name with a director as the user can be provided tax free, even with private use
- A personal phone contract can only be claimed for the identifiable business calls
- Broadband you would have had anyway is generally not claimable in full for sole traders
- Equipment such as a desk, chair and laptop used for the business is a business cost, with capital allowances where relevant
Keep the evidence simple
A one-page note showing the rooms, the hours, the bills used and the resulting percentage takes ten minutes a year and turns an estimate into a supported claim. That is the difference between a deduction that stands and one that gets removed.
This article is general guidance for business owners in the UK and does not amount to advice for your particular circumstances. Tax rules change and the right answer depends on your figures — please take specific advice before acting.
