Sole Trader Home Expenses: Working From Home Guide 2026/27

Sole trader home expenses can include the business share of household costs, phone and broadband. You can calculate actual costs or use HMRC’s monthly flat rate for household running costs. Eligible fixed costs can be claimed separately alongside the flat rate.

Working from a spare bedroom or kitchen table can create an allowable business expense. You do not need a permanently separate office to make a reasonable claim for genuine business use.

The important distinction is between running costs, fixed costs and separate business expenses. HMRC’s highest home-working flat rate gives a £312 deduction over 12 qualifying months. That is not necessarily your total home-expense claim or the amount of tax you save. 

This Accfirm guide explains the rates, shows a comparison using the same costs and takes you through the records needed to support your claim.

Which home expenses can a sole trader claim?

You can claim costs attributable to your trade, with private use excluded. The allowable amount depends on the expense, your working arrangements and the evidence supporting the business share.

Common costs include:

GOV.UK recognises that home-working costs can be apportioned by a reasonable method, including rooms and time. Claiming a room’s full share of every bill without considering private use can overstate the deduction. 

Routine bookkeeping at home does not, by itself, establish business water use. A water claim needs consumption attributable to the trade. Repairs to a private-only room are also excluded. 

Your work might involve providing services, producing goods, managing customer orders or keeping business records. The claim should follow that actual activity.

For other cost categories, see Accfirm’s allowable expenses for sole traders.

What are HMRC’s working-from-home rates for 2026/27?

The monthly simplified expense rates are £10, £18 or £26, depending on qualifying business hours worked at home. You need at least 25 hours in a month to use a flat-rate deduction for that month.

Assess the hours month by month. Working longer hours later in the year does not change an earlier month’s band. 

Which business hours count?

Count time spent on core business activities at home. HMRC includes providing goods or services, maintaining records, marketing and obtaining new business.

A plumber’s evening invoicing or a freelancer’s bookkeeping can therefore count. Record the time spent doing the work, including the relevant business task. 

How do you calculate a claim when your hours change?

Suppose your records show the following pattern over 12 months:

The running-cost deduction is £240. Separately allowable fixed costs, phone and broadband would need their own calculations.

Can you claim other home expenses alongside the flat rate?

Yes. HMRC permits separately justified fixed costs, telephone and broadband alongside the flat-rate deduction for household running costs. Each additional claim still needs to satisfy the normal business-expense rules.

This distinction changes how you should compare the methods:

HMRC specifically identifies Council Tax, insurance and mortgage interest as fixed costs that may be deducted separately where an identifiable business proportion exists. 

Avoid claiming the flat rate and the actual business share of the same covered running costs. That would count the cost twice.

The useful comparison is your actual business running costs against the flat-rate total. Keep eligible fixed costs and other separate expenses in both calculations.

How do you calculate actual sole trader home expenses?

Calculate the business share of each relevant cost using a method that reflects area, time and consumption. HMRC does not prescribe one universal percentage or a single formula for every household bill.

Work through four steps:

1. Identify the cost. Separate utilities, fixed property costs, communications and equipment.
2. Identify the business space. Consider comparable rooms or measured floor area.
3. Check business and private use. Establish when the space is used for each purpose and whether consumption can be measured.
4. Document the calculation. Explain why the chosen allocation reflects that expense.

A starting formula can be:

Allowable share = relevant cost × supported business-use proportion.

That proportion may require an area calculation and a time adjustment. Electricity consumed by specialist equipment might need a usage calculation instead. 

Must a room be permanently used only for business?

No. A room can be used for business during one period and privately at other times. The calculation must isolate the business use.

For example, a dining room used for freelance work during the morning and family meals in the evening can support an apportioned expense. HMRC’s examples demonstrate mixed-use rooms and different allocations for fixed and running costs. 

Should you divide every bill by the number of rooms?

Only if that produces a reasonable result for the particular cost. Rooms of different sizes, shared spaces and equipment with high electricity consumption can make a simple room count unsuitable.

There is no standard business percentage for all freelancers or home workers. A broadband allocation should reflect internet use rather than automatically copying the floor-area percentage. 

Which method gives the larger home-expense deduction?

Compare both methods using the same eligible fixed costs and separate business expenses. Comparing an all-inclusive actual-cost figure with only the flat rate can produce the wrong conclusion.

The following example illustrates the calculation. It is not an Accfirm client case or a standard allocation for every home.

Worked example: a room with business and family use

A self-employed writer works at home for four hours every day. The same room is used by the family for four hours in the evening. The workspace represents 10% of the home’s area.

The example assumes the bills and usage support these allocations:

The time factors differ because the example allocates fixed costs across the day and running costs across the room’s occupied hours. These are illustrative allocations; other arrangements can justify different methods. HMRC’s examples demonstrate this distinction. 

The actual-cost total is:

£120 running costs + £120 fixed costs + £180 broadband = £420.

The writer also exceeds 101 qualifying home-working hours in each of the 12 months used in the example. The flat-rate comparison is therefore:

The flat-rate route gives a £192 larger deduction in this example. Comparing £420 with £312 alone would incorrectly favour actual costs.

Where actual business running costs are higher than the applicable flat rate, the actual method may give the larger claim. Calculate both rather than assuming full-time home working always makes actual costs better.

How much tax do sole trader home expenses save?

An expense deduction reduces taxable profit. The tax saving depends on the Income Tax and National Insurance that would otherwise apply to that profit. A £312 deduction is not a £312 payment from HMRC.

Suppose the writer has £30,000 profit before the home-expense deduction, no other income and the standard Personal Allowance. They live in England, Wales or Northern Ireland and are below State Pension age.

Both illustrated deductions fall wholly within profit charged at 20% Income Tax and 6% Class 4 National Insurance. The additional £192 deduction therefore reduces the combined liability by:

£192 × 26% = £49.92.

Those rates are conditional on the example’s circumstances. Scottish Income Tax rates, other income and crossing tax or NI thresholds can change the saving. 

See Accfirm’s guide to how much tax a sole trader pays for the wider calculation.

Can you claim home expenses and the £1,000 trading allowance?

You cannot deduct home expenses in addition to the trading allowance against the trading income covered by that allowance. This restriction includes simplified home-working expenses as well as actual household costs.

For eligible income above £1,000, compare the trading allowance with all your allowable business expenses, rather than comparing it with the home claim alone. 

For example:

Under these assumptions, deducting expenses produces £462 less taxable profit than using the trading allowance. Eligibility, losses and other reliefs still need consideration.

The £1,000 trading allowance and HMRC’s home-working flat rates are separate rules. Choosing one does not allow you to stack both deductions against the same covered trading income.

How do you record and claim working-from-home expenses?

Calculate the supported business amount, include it in your expense records and report it through the applicable Self Assessment process. Keep the calculation behind the figure so you can explain it later.

Follow these steps:

1. Record qualifying home-working hours for each month if using flat rates.
2. Collect bills supporting any actual running costs and separately claimed fixed or communication costs.
3. Calculate business use and explain the allocation for each expense.
4. Compare the two running-cost methods without duplicating expenses.
5. Compare your total business expenses with the trading allowance, where eligible.
6. Enter the deductions in the appropriate expense categories in your accounts and tax software.
7. Review the final figures before submitting your return or completing the relevant MTD process.

HMRC normally does not require you to send evidence of every expense with the return, but you must keep the records in case it asks to check them. 

What evidence should you keep?

Keep an hours log for the flat rate and bills plus calculations for separately claimed costs. Simplification of the running-cost calculation does not remove the need to substantiate other deductions.

Accfirm’s sole trader bookkeeping guide explains how to organise these records.

How long should you retain the records?

Normally, keep self-employed records for at least five years after the relevant 31 January submission deadline. For a 2026/27 return due on 31 January 2028, that means keeping supporting records until at least the end of January 2033. Longer retention can be relevant in some circumstances. 

When do you claim for 2026/27?

The usual online filing and balancing payment deadline is 31 January 2028. This covers the tax year ending on 5 April 2027. Individual filing circumstances can alter the timetable. 

If MTD for Income Tax applies to you, use compatible software and follow its digital records, quarterly updates and year-end reporting requirements. Claiming expenses does not reduce the gross qualifying income used to assess MTD eligibility. 

For the broader filing process, read Accfirm’s sole trader Self Assessment guide.

Does claiming home expenses affect Capital Gains Tax?

An expense claim does not automatically remove Private Residence Relief when you sell your home. Exclusive business use of part of the property is the relevant issue. The factual use of the space matters, regardless of which expense method you choose.

HMRC distinguishes regular residential use from occasional, very minor private use. Merely storing personal possessions in a business room does not necessarily prevent it from being treated as exclusively business-used.

A room with genuine regular business and residential use can still support an apportioned expense claim. Choosing the flat rate does not, by itself, protect relief on space that is actually used exclusively for business. 

Frequently asked questions

Can I claim if I work from home for fewer than 25 hours a month?

You cannot use the monthly home-working flat rate below 25 hours, but an actual-cost claim may still be available. Keep the amount consistent with the limited business use and retain the calculation. HMRC recognises reasonable claims for minor home-working activity. 

Can I claim my full mortgage payment?

No. Mortgage capital repayments are not an allowable home-working expense. An eligible business share of mortgage interest may be deductible. Use an interest statement rather than treating the entire monthly mortgage payment as a business cost. 

Can I charge my sole trader business rent for using my home?

You cannot rent your home to yourself. A sole trader may claim an appropriate share of rent actually paid to a landlord, but cannot create an additional deduction by charging their own trade an invented rental amount. 

Can I claim broadband and phone bills in full?

Claim the business share where use is mixed. HMRC permits the full cost where private use is not significant, but this is a factual test. Working full-time from home does not automatically make every household internet use business-related. 

Can I claim a laptop, desk or office supplies separately?

Business equipment and supplies follow separate expense rules. The business share of equipment such as computers is normally treated as an allowable expense under cash basis, or through capital allowances under traditional accounting. Exclude private use and avoid duplication. 

Do cash basis users have a £500 limit on interest deductions?

The former cash basis interest restriction was removed from 2024/25. Do not apply that old £500 cap to an otherwise eligible 2026/27 business-interest claim. Removing the cap does not make the private share of interest deductible; the claim still needs to satisfy the normal expense rules. 

Does the 2026 change to employee home-working relief stop sole trader claims?

No. Employee tax relief and self-employed business expenses are different rules. GOV.UK states that employees cannot claim home-working tax relief for 2026/27. Eligible sole traders can still claim business expenses using the rules explained here. 

How can Accfirm help with your home-expense claim?

Accfirm can help you review the costs, document business use and include supported deductions in your accounts and tax return. A useful review compares running-cost methods, checks separately allowable costs and considers the trading allowance alongside your wider expenses.

Speak to our accountants for sole traders about your bookkeeping and Self Assessment requirements, or contact Accfirm to discuss your home-working arrangements.

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