Is using your home as an office
tax deductible?

Partly. If you work from home you can claim a share of household costs such as heating, electricity, Council Tax, mortgage interest or rent, and internet and phone, divided on a reasonable basis (GOV.UK). Or you can use the flat rate: £10, £18 or £26 a month depending on hours worked at home (simplified expenses).

Working from home is where most sole traders start, and the costs are real: heating the room, lighting it, and a share of Council Tax and mortgage interest or rent. You can claim them in one of two ways. Work out the actual business share of the bills, or use HMRC's flat rate by hours, which needs no calculation. The flat rate is simpler; actual costs are usually worth more for a dedicated office used full time.

Is using your home as an office 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, Simplified expenses if you’re self-employed, HMRC Business Income Manual BIM47810: use of home.

GOV.UK says that if you work from home you may be able to claim a proportion of costs for heating, electricity, Council Tax, mortgage interest or rent, and internet and telephone use, using a reasonable method such as the number of rooms used for business or the time spent working from home. Its example is a four-room home with an office used only for work: a £1,120 electricity bill gives £280, or £40 if the office is used one day a week (expenses overview). HMRC's manual explains that the part of the home need only be used solely for business while it is being used for the business, not permanently (BIM47810), and gives worked examples apportioning by area and time (BIM47825). The flat rate applies if you work 25 hours or more a month from home (simplified expenses).

When you can claim it

• A share of heating, lighting and power, by the space and time used for business.
• A share of Council Tax, home insurance and mortgage interest or rent (not mortgage capital).
• The business share of phone and broadband.
• The flat rate of £10, £18 or £26 a month instead of working out heat, light and power.

When you cannot

• Mortgage capital repayments, only the interest.
• Costs for rooms you never use for the business, such as redecorating a dining room.
• Both the flat rate and actual heat, light and power for the same period.
• Costs of entertaining customers at home.

What to claim instead

If your business use is light, such as writing up records once a week, HMRC accepts a small, reasonable estimate without detailed workings: its own example is £104 a year, about £2 a week. If you work from home most days, work out the actual share or use the flat rate, whichever is higher, and keep the calculation.

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 using your home as an office, 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 own case of Chris

HMRC's example: Chris, an author, uses her living room for work 8am to 12pm, and her family uses it in the evening. The room is 10% of the house. Fixed costs (cleaning, insurance, Council Tax, mortgage interest) are £6,600, so the room's share is £660, and by time a sixth of that is business: £110. Electricity of £1,500 gives £150 for the room, half by time: £75. She adds a third of her phone costs and two thirds of broadband.

Flat rate or actual costs

The flat rate is £10 a month for 25 to 50 hours of business use at home, £18 for 51 to 100 hours and £26 for 101 hours or more. Over a year of full-time home working that is £312. Actual costs are usually higher for a dedicated office used every day, because they can include a share of Council Tax, insurance and mortgage interest or rent, which the flat rate does not. Work out both for a typical year and use whichever is higher, keeping the calculation.

Wholly and exclusively for part of the time

A room does not have to be an office forever. HMRC's guidance is that while part of the home is being used for the business, that must be its only use at that time. A spare room used as an office during the day and a guest room at weekends can be claimed for the working hours. A kitchen table where the family eats while you work cannot, because it is being used for two purposes at once.

Capital Gains Tax and business rates

If part of your home is used exclusively for the business, that part may not qualify for private residence relief when you sell, so some of the gain could be taxable. Rooms used for business only part of the time, or also used privately, avoid this. Separately, a part of the home used exclusively and substantially for business can in some cases be assessed for business rates. For most home offices neither applies, but both are reasons to use a room for mixed purposes rather than wall it off.

Repairs and redecoration

HMRC's examples treat general household costs, such as painting the outside of the house, as apportionable by business use, while redecorating a room you do not use for business is not allowable at all. Redecorating the office itself, if used only for business during working hours, is allowable for that share. Improvements, such as building an extension, are capital, not running costs.

Living at business premises

If you live at your business premises, such as a small guesthouse or bed and breakfast, there is a different flat rate: you work out the total premises costs and deduct a flat amount for personal use, £350 a month for one person, £500 for two and £650 for three or more (GOV.UK). The rest is allowable.

Where it goes on your return and in MTD

On the self-employment pages of your return, the claimable part of using your home as an office 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.

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

• Claiming the flat rate and actual heat and power for the same months.
• Including mortgage capital repayments rather than just the interest.
• Claiming a large share of a room also used by the family at the same time.

Related expenses

This item sits in the rent, rates, power and insurance costs category, alongside business rates, council Tax, garden office, home and landlord insurance, mortgage interest, rent, service charges and solar panels. 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.