If you work from home as a self-employed individual in the UK, you can claim tax relief on a portion of your household bills. HMRC offers two methods: a simple flat rate or a detailed calculation of actual costs. This guide explains both options with worked numerical examples to help you decide which gives you a bigger deduction.
Method 1: Flat Rate (Simplified Expenses)
The flat rate method lets you claim a fixed amount based on hours worked from home per month, with no need to calculate actual bills:
| Hours Worked from Home per Month | Flat Rate Deduction |
|---|---|
| 25–50 hours | £10 per month |
| 51–100 hours | £18 per month |
| 101+ hours | £26 per month |
A self-employed person working from home full-time (101+ hours per month, 12 months) would claim £312 per year.
Advantages: Simple, no need to keep household bills as receipts, easy to calculate.
Disadvantages: The maximum claim (£312/year) is modest. If your actual home costs are significant, this method may leave money on the table.
Method 2: Actual Costs (Proportion of Expenses)
Calculate the business-use proportion of your actual household expenses. Eligible costs include:
- Gas and electricity
- Water rates
- Council tax
- Broadband and phone line
- Rent or mortgage interest (not principal)
- Home insurance
- Repairs and maintenance (general household)
How to calculate: Divide the floor area of your workspace by the total floor area of your home. Adjust for the proportion of time the space is used for business. Apply this percentage to your total household bills.
Worked Example
A freelance consultant has a 12 sqm office in a 100 sqm flat (12% floor area). They work from home 5 days a week. Annual household costs:
- Gas and electricity: £1,800
- Council tax: £1,400
- Broadband: £480
- Rent: £12,000
- Insurance: £300
- Total: £15,980
At 12% business use: £15,980 × 12% = £1,918 per year.
Compare this to the flat rate maximum of £312 — the actual costs method gives over 6 times more in this scenario.
Which Method Is Better for You?
The actual costs method almost always gives a higher deduction if you work from home regularly and have significant household expenses. The flat rate is best suited for people who work from home occasionally (under 25 hours per month earns nothing) or who want maximum simplicity.
Important: Once you choose simplified expenses for your home, you must use simplified expenses for your home for the duration of your business (though you can switch back if you start a new business). Consider this before choosing the flat rate.
Receipt Requirements
If using the flat rate, you only need to track your hours worked from home. If using actual costs, keep all household bills — utility statements, council tax bills, rent receipts, broadband invoices, insurance documents. Scan and store them digitally with an AI receipt scanner for HMRC-compliant record keeping.
For the full list of deductible expenses, see our guide to self-employed expenses in the UK. For all simplified expense categories, see flat rate expenses HMRC.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified accountant or tax adviser for your specific situation.
