Working from home allowance for the self-employed and directors.

Two groups, two sets of rules

People often talk about "the working from home allowance" as if it were one thing. In practice it depends on how you run your business.

• Sole traders and some partners. If you are self-employed, you can deduct part of your household costs as a business expense. You choose between a flat rate and the actual costs method.
• Limited company directors. You are an employee of your company. The company can pay you a tax-free amount for extra household costs, or cover certain equipment, under the employer rules.

Simplified expenses can be used by sole traders and by business partnerships that have no companies as partners. They cannot be used by limited companies or by partnerships involving a limited company. So the flat monthly rates below are not something your company can claim.

The flat rate for the self-employed

The flat rate is part of HMRC's simplified expenses. You do not have to split your bills between personal and business use. Instead, you claim a fixed amount for each month, based on the hours you work at home.

• 25 to 50 hours a month: £10 a month.
• 51 to 100 hours a month: £18 a month.
• 101 hours or more a month: £26 a month.

Below 25 hours in a month, you cannot use the flat rate for that month. The hours that count are hours spent working on your business at home. The test is month by month, so a quiet month and a busy month can sit at different rates in the same year.

What the flat rate does not cover

The flat rate does not include telephone or internet costs. You can still claim the business share of those separately, based on what you actually pay. Keep the bills and a note of how you worked out the business share.

A worked example

The actual costs method

The alternative is to work out the real business share of your household running costs. GOV.UK lists costs such as heating, electricity, Council Tax, mortgage interest or rent, and internet and telephone use.

You need a reasonable way of dividing the costs between business and personal use. The two common ones are:

• By rooms. Count the rooms in your home and how many you use for business.
• By time. Look at how much of the time a room or service is used for work.

Many people combine the two. A room used as an office during the working week but as a guest room at weekends is used for business only part of the time.

A worked example

Flat rate or actual costs: which is better?

There is no single answer. It depends on the size of your home, how much of it you use, and your bills.

• The flat rate is simpler. You only need a record of your hours at home each month. There is no need to split every bill. The most it can give you is £26 a month, which is £312 for a full year.
• Actual costs can be higher. If you have a dedicated office and high running costs, a fair share of the bills may come to more than the flat rate. It takes more work and more records.
• Either way, be reasonable. The claim should reflect how you really use your home. A room you mostly use for personal life is not a business room just because you answer emails there.

GOV.UK has a simplified expenses checker that compares the two methods for your figures. It is worth running before you decide.

What records to keep

Whichever method you use, HMRC can ask how you arrived at the figure. Good records make that an easy conversation.

• For the flat rate: a simple log of the hours you worked at home each month, such as a calendar or timesheet.
• For actual costs: the household bills, a note of how many rooms you have and which you use for work, and how you split the time.
• For phone and internet: the bills and a short note of how you worked out the business share.

If you keep your books up to date through the year, these figures are ready when your Self Assessment return is due. If your records have fallen behind, our catch-up bookkeeping service can bring them up to date first.

Company directors: the employer route

If you trade through a limited company, the company is your employer. The working from home rules for employers apply, not simplified expenses.

The tax-free payment for household costs

Your company can pay you up to £6 a week, or £26 a month if you are paid monthly, for additional household costs without tax or National Insurance. That works out at £312 for a full year. Two conditions apply:

• A homeworking arrangement. You must be working at home as agreed with the company, and regularly work from home under that arrangement.
• No more than your extra costs. The payment must not exceed your additional household expenses.

The company can pay more than the weekly limit tax-free only if the payment is no more than your actual additional household costs, so keep a record of how those costs were worked out. Any amount above your additional household costs counts as earnings, and PAYE and Class 1 National Insurance are due on it through payroll.

A short written note of the homeworking arrangement, and a regular payment through the company's books, keeps this tidy. The payment should be recorded in the accounts as an expense of the company.

Equipment the company provides

Equipment, services or supplies the company provides so you can work from home are exempt if they are only used for business, or if any private use is insignificant. Laptops, tablets and computers are covered, and one mobile phone and SIM card per employee. Broadband is exempt only if no connection was already available, it is needed to work from home, and it is mainly used for business.

If something is provided for both business and private use, it must be reported on a P11D and Class 1A National Insurance paid on the value of the benefit.

Employees claiming from HMRC: no relief for 2026/27

Directors and other employees could, in some cases, claim tax relief directly from HMRC for working from home. GOV.UK now says that for the tax year 6 April 2026 to 5 April 2027 you will not be able to claim this relief.

You can still claim for the 4 previous tax years if you met the conditions at the time. Those conditions were strict. You had to work from home because you had to, for example because your employer did not have an office. Choosing to work from home, including under a contract that allows it, did not qualify.

This change does not affect the tax-free payment your company can make to you under a homeworking arrangement. It also does not affect the self-employed flat rate or actual costs methods.

Where this fits in your bookkeeping

For sole traders, the home office figure is usually added once a year, when the Self Assessment figures are finalised. The supporting records, such as your hours log and bills, are best gathered as you go.

For directors, the tax-free payment is a regular expense in the company's books. It should appear as a payment to you, coded to the right account, every week or month it is made. That is easy to check when the bank is reconciled each working day, and hard to piece together at year end if it was paid irregularly.