Working From Home Expenses
On this page
Who Can Claim Working From Home Expenses? →
HMRC Flat Rate Working From Home Allowance (£312) →
Claiming Actual Use of Home Costs (HMRC Method) →
Formula for Actual Use of Home Costs →
Example 1 – Actual Costs Below £312 (Flat Rate Is Better) →
HMRC Guidance on Exclusivity →
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What Can You Claim?
Working from home can provide valuable tax relief, but HMRC applies strict rules on what can be claimed and how costs must be calculated. The correct method depends on:
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Your business structure (sole trader vs limited company)
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Whether you use the flat-rate allowance or actual costs
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How much of your home is used exclusively and regularly for business
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This guide explains:
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The HMRC-approved methods
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The exact formula for calculating actual costs
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When to use the £312 flat rate
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Common errors to avoid
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Prepared by Karia Accountants, Chartered Accountants specialising in owner-managed businesses.
Who Can Claim Working From Home Expenses?
Sole Traders & Partnerships
Can claim:
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Either the flat-rate simplified expense
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Or actual proportion of household running costs
Limited Company Directors
Do not use the £312 simplified expense. Instead, they typically:
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Reimburse actual costs
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Or claim a home office licence fee
This page focuses on the HMRC simplified expense vs actual cost comparison, which is most relevant to sole traders.
HMRC Flat Rate Working From Home Allowance (£312)
HMRC allows a simplified expense based on hours worked at home.
Monthly Rates
Hours Worked at Home (per month)
25 – 50 hours
51 – 100 hours
101+ hours
​Capital Allowances
£10
£18
£26
Maximum annual claim:
£26 × 12 = £312
Key Features
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No calculations required
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No bills needed
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Cannot claim any additional household costs if using this method
When Is the Flat Rate Best?
The flat rate is best where:
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Home working use is low or irregular
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Household costs are modest
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Administrative simplicity is preferred
However, it often underclaims where:
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A room is used regularly for business
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Energy and council tax costs are high
​Claiming Actual Use of Home Costs (HMRC Method)
HMRC allows a proportion of allowable household running costs to be claimed based on:
(Rooms used ÷ total rooms) × (business use time ÷ total time) × allowable costs
Allowable Costs Include:
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Electricity
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Gas
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Water
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Council tax
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Rent or mortgage interest (not capital)
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Broadband (business portion only)
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Home insurance (if increased due to business use)
Not Allowable:
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Mortgage capital repayments
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Home improvements
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Private-only utilities
Formula for Actual Use of Home Costs
Step-by-Step Formula
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Total allowable household costs (annual)
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Business room proportion = Business rooms ÷ Total rooms
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Time apportionment = Business hours ÷ Total household hours
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Claimable expense
= Total costs × Room % × Time %
Example 1 – Actual Costs Below £312 (Flat Rate Is Better)
Facts
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Total rooms: 5
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Business rooms: 1
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Business use: 45 hours per week
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Total allowable household costs: £6,800 per year
Step 1: Room Percentage
1 ÷ 5 = 20%
Step 2: Time Percentage
45 × 52 = 2,340 hours 2,340 ÷ 8,760 = 26.71%
Step 3: Apply Formula
£6,800 × 20% × 26.71% = £363 per annum (rounded)
Result
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Actual cost claim: £363
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Flat rate maximum: £312
✔Actual cost method gives a higher deduction
HMRC Guidance on Exclusivity
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Room must not be exclusively business unless you accept CGT risk
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Mixed-use rooms (e.g. office/guest room) are acceptable
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Claims must be reasonable and consistent
Capital Gains Tax Warning
If a room is used exclusively for business, part of the property may:
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Lose Private Residence Relief
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Be subject to Capital Gains Tax on sale
This is why most claims are time-apportioned.
Common Errors We See
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Claiming £312 and actual costs
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Using total mortgage payments instead of interest only
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Ignoring time apportionment
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Claiming broadband in full when used privately
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Claiming home improvements
Which Method Should You Use?
Scenario
Low use / low costs
High energy & council tax
Simple compliance
Dedicated workspace
Recommended Method
Flat rate
Actual costs
Flat rate
Actual costs
How Karia Accountants Can Help
At Karia Accountants, we:
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Calculate the most tax-efficient method
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Ensure HMRC-compliant apportionment
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Advise on CGT exposure
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Prepare supporting schedules for HMRC enquiries
If you are unsure which method applies, professional advice can prevent costly mistakes.
