Is council Tax
tax deductible?

Partly. A sole trader working from home can claim a proportion of Council Tax for the business use of the home (GOV.UK). A landlord can deduct Council Tax they pay on a let property, such as between tenancies or on an HMO (GOV.UK).

Council Tax is a household cost, but it can be part of a working-from-home claim, and it is a real cost of letting in some cases. The two situations have their own rules.

Is council Tax tax deductible?

The HMRC rule

Only the business proportion of heating, electricity, Council Tax, mortgage interest or rent and internet is allowable, divided on a reasonable basis such as rooms or time. The rule comes from If you work from home, Work out your rental income when you let property.

GOV.UK includes Council Tax in the household costs a sole trader working from home can apportion (expenses overview), and HMRC's worked examples treat it as a fixed cost apportioned by area and time (BIM47825). The simplified expenses flat rate covers heat, light and power only (simplified expenses). For landlords, Council Tax paid by the landlord is an allowable expense (landlords).

When you can claim it

• A share of Council Tax for the part of your home used for business, by area and time.
• Council Tax a landlord pays during void periods between tenants.
• Council Tax on an HMO or all-inclusive let where the landlord pays it.
• Council Tax on a furnished property the landlord remains liable for.

When you cannot

• Council Tax on your home if you do not work from it.
• The private share of Council Tax.
• Council Tax tenants pay directly.
• Council Tax when you only use the working-from-home flat rate, which does not include it.

What to claim instead

If you use the flat rate for working from home, you cannot add Council Tax to it. Work out actual costs if you want a share of Council Tax, insurance and mortgage interest or rent included; for a dedicated office used full time, that is often worth more than the flat rate.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is a running cost, so on the cash basis it counts when you pay it and on traditional accounting when you incur it. Nothing about it needs spreading over later years.
4. Is there a specific rule? For council Tax, the deciding rule is working from home: only the business proportion of heating, electricity, Council Tax, mortgage interest or rent and internet is allowable, divided on a reasonable basis such as rooms or time.

Worked example: HMRC’s case of Bill

HMRC's example: Bill uses one small room, 5% of the floor area of his house, exclusively as an office. His Council Tax, insurance and mortgage interest total £4,500, so he claims 5%, £225. His electricity for heating and lighting is £300, so he claims £15. His total claim is £240, plus the business share of his phone bill.

Actual costs versus the flat rate

Council Tax is one of the reasons actual costs can beat the flat rate. The flat rate for working from home tops out at £26 a month, £312 a year, and covers only heat, light and power. An actual-cost claim can add a share of Council Tax, insurance and mortgage interest or rent. For someone using a room full time, the actual figure can be several times the flat rate.

Single person discount

If you live alone and receive the single person discount, you apportion the bill you actually pay. Discounts and support do not change the principle; the claim is a share of the cost you bear.

Landlords between tenancies

When a let property is empty between tenancies, the landlord usually becomes liable for Council Tax. That cost is a genuine expense of the letting business, and allowable. Some councils charge premiums on long-term empty homes; those are still Council Tax, not penalties, and are allowable if the property is held for letting.

HMOs and bills-inclusive lets

In a house in multiple occupation, the landlord is usually liable for Council Tax. In other lets with an all-inclusive rent, the landlord may pay it by agreement. Either way, the Council Tax the landlord pays is allowable, and the rent covering it is income.

Where it goes

For sole traders, the business share of Council Tax is part of the use-of-home figure in rent, rates, power and insurance costs, box 21. For landlords, Council Tax goes in box 24 on the UK property pages, rent, rates, insurance and ground rents.

If you are a landlord

Landlords can deduct Council Tax they pay, as GOV.UK lists it alongside water rates, gas and electricity among the allowable costs of letting (GOV.UK). Keep the bills for void periods and note the dates the property was empty.

Where it goes on your return and in MTD

On the self-employment pages of your return, the claimable part of council Tax belongs in rent, rates, power and insurance costs (SA103F box 21). The same category is used in Making Tax Digital quarterly updates, so recording it in the right place once keeps both returns consistent.

For a landlord, it belongs in rent, rates, insurance and ground rents (property) (SA105 box 24 on the UK property pages), and in the matching category of a Making Tax Digital property update.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

The accounting basis changes when a cost counts. On the cash basis, the default for sole traders since 2024/25, it counts when you pay it; on traditional accounting, when you incur it, with things you keep claimed through capital allowances.

How much an allowable cost saves

An allowable expense does not come back to you in full: it reduces your profit, so it saves tax at your marginal rate. For a sole trader in England, Wales or Northern Ireland that is 26p in the pound at the basic rate (20% Income Tax plus 6% Class 4 National Insurance) and 42p at the higher rate. The sole trader tax calculator works out the figure for your own profit.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep the household bills you apportion, a note of the method (rooms, floor area, hours) and the figures behind it, and a simple record of the hours you work at home if you use the flat rate. Recheck the method if the way you work changes, for example if you move into a unit.

If Making Tax Digital for Income Tax applies to you (qualifying income over £50,000 from April 2026, £30,000 from April 2027 and £20,000 from April 2028), the records must be digital, and each quarter's costs go into a quarterly update. Check your date with the MTD requirement checker.

Common mistakes

• Adding Council Tax to the working-from-home flat rate.
• Claiming the whole Council Tax bill for a home office.
• Landlords claiming Council Tax the tenant paid.

Related expenses

This item sits in the rent, rates, power and insurance costs category, alongside business rates, garden office, home and landlord insurance, mortgage interest, rent, service charges, solar panels and stamp Duty. The A to Z of expenses answers the same question for every other cost.

If you record your costs in TapTax, each one lands in the HMRC category it belongs to, with its receipt attached, so your quarterly updates and year-end return use the same figures.