Whether you’re a sole trader, business partner, or limited company director, if you work from home, there are ways you can claim tax relief on some of your household costs. The method depends on your business structure — and this guide breaks down each one with easy examples.
Sole Traders — Claiming Household Costs
Sole traders can claim tax relief on a portion of their home expenses. You can either:
- Use HMRC’s flat rate (£6 per week), or
- Claim actual costs by working out the business use of your home
Example:
Sarah runs her own graphic design business. She works from one room in her 5-room home (excluding bathroom/kitchen) about 80% of the time.
Annual household bills:
- Mortgage interest: £6,000
- Utilities: £2,400
- Council tax: £1,500
Step-by-step:
- One room out of five = 20%
- Used for business 80% of the time = 20% × 80% = 16% business use
- Apply that 16% to the bills:
Expense Total 16% Business Use
Mortgage Interest £6,000 x 16% = £960
Utilities £2,400 x 16% =£384
Council Tax £1,500 x 16% =£240
Total£1,584
So, Sarah can claim £1,584 as a business expense.
Important: Don’t use any room exclusively for work. If you do, you may lose Capital Gains Tax relief on part of your home when you sell it.
Partnerships — Reimbursing Home Costs
If you’re in a business partnership and use your home for work, you can claim a share of costs, similar to a sole trader. This can be reimbursed by the partnership if allowed in your agreement, or declared as property income if you charge the partnership rent.
Example:
Amy and Tom run a consultancy together. Amy works from home 3 days a week.
- The partnership pays her £50 per month as a home working reimbursement (£600 a year)
- Amy keeps records and claims an equivalent amount of household expenses on her personal tax return to offset the income
Alternatively, if she charges rent (under a formal agreement), she would declare that in the property section of her tax return — but also deduct relevant home expenses.
Limited Company Directors — Two Ways to Claim
If you’re a director working from home, you’re technically an employee of your own company. That means the company can reimburse you, but the method needs to follow HMRC rules.
Option 1: Flat Rate
Your company can pay you £6 per week (£312 per year) tax-free without needing to keep receipts.
No extra paperwork. No tax implications.
Option 2: Rent Your Home Office to the Company
You can charge your company rent, but you must:
- Use a non-exclusive licence (not a tenancy)
- Keep using the room partly for personal purposes (to avoid CGT risks)
- Make sure the rent is based on local commercial rates (e.g. serviced offices)
Example:
John is a director of ABC Ltd. He works from one room at home and charges the company £3,000 a year in rent.
He looks at local serviced offices and sees similar space rents for about £300/month, so his rate is reasonable.
His actual household expenses for that room (apportioned) are £2,500, so:
- Rental income: £3,000
- Expenses claimed: £2,500
- Taxable profit (on property section of his tax return): £500
Top Tips
- Keep evidence and records of expenses, room usage, and calculations
- Compare your space to local serviced office rates when setting rent
- Don’t let your home office become 100% business use — it could affect your Capital Gains Tax position when selling your home
If you’d like help setting this up for yourself or your business, feel free to get in touch with us at ts.tax