Working From Home as a Self-Employed Person: What Can You Claim?

Many sole traders and self-employed people work from home, at least some of the time. The good news is that HMRC allows you to claim a portion of your home running costs as a business expense — reducing your taxable profit and your tax bill. The amount you can claim depends on which method you use.

Method 1: HMRC’s Flat Rate (Simplified Expenses)

The simplest option is to use HMRC’s flat rate for working from home. The amount you can claim depends on how many hours per month you work from home:

• 25–50 hours per month — £10/month (£120/year)
• 51–100 hours per month — £18/month (£216/year)
• 101+ hours per month — £26/month (£312/year)

These amounts can be claimed without any calculation or receipts — just keep a record of your hours worked at home each month to justify which band you’re in. HMRC’s simplified expenses checker can help you work out whether flat rate or actual costs gives you the better result.

The flat rate is convenient but is often quite low — particularly for people who work full-time from home. If your home costs are significant, the actual cost method may be more beneficial.

Method 2: Calculating Your Actual Home Costs

Alternatively, you can calculate the actual business proportion of your home running costs. The eligible costs include:

• Heating and electricity
• Broadband (if not claimed elsewhere as a standalone business expense)
• Water (in some cases)
• Mortgage interest or rent (with care — see below)
• Council Tax

To calculate the business proportion, divide the number of rooms used for business by the total number of rooms in the property, then apply the proportion of time those rooms are used for work. For example, if you have 5 rooms and use one exclusively for work 40% of the time, you could claim 1/5 × 40% = 8% of eligible home costs.

This method requires more record-keeping but typically results in a higher claim.

A Word of Caution: Exclusive Business Use

HMRC’s rules state that expenses must be incurred wholly and exclusively for business. A room that’s used exclusively as a business office is fully claimable (in proportion), but if the same room doubles as a spare bedroom or hobby room, the claim becomes mixed use and must be apportioned carefully.

Be particularly careful about claiming mortgage interest or rent for a dedicated home office — if HMRC considers a room to be used exclusively for business, it could affect your Capital Gains Tax position when you sell the property. In most cases, using the flat rate or a modest proportion of actual costs is safer.

Phone and Broadband

If you use your personal phone or broadband for work, you can claim the business proportion. This requires estimating what percentage of usage is work-related. If you have a dedicated business phone or broadband line, the full cost is claimable as a business expense.

Which Method Should You Use?

The flat rate is simpler and perfectly valid — and for many people, the difference in claim value is modest. If you work full-time from home and have high household costs, the actual cost method may be worth the extra record-keeping. You can’t use both methods in the same year — you must choose one and apply it consistently.

Our wider guide to expenses sole traders can claim covers the full range of allowable business costs.

Not Sure What You’re Entitled To?

PBAS works with self-employed people across Scotland to ensure every legitimate expense is captured correctly. If you’d like us to review your expenses or handle your bookkeeping and Self Assessment, get in touch.