How much can you claim for the use of home as office allowance when UK contracting? You may occasionally work from home while running a limited company or working as self-employed.
HMRC understands this growing trend and offers specific relief options for home-based professionals. The system aims to be fair, helping individuals recover genuine business costs. But which expenses qualify, and how do the rules differ between employment types?
In this comprehensive guide, we explore the allowances available for the 2024/25 tax year, claim methods, and how to stay compliant while maximising your tax efficiency.
What Does HMRC Allow for Home Office Claims in 2024/25 and 2025/26?
For the 2024/25 and 2025/26 tax years, HMRC allows eligible individuals to claim a flat-rate home office allowance of £6 per week, totalling £312 annually.
This rate has remained unchanged since it was increased during the pandemic in 2020. It helps cover extra costs like electricity, heating, and water due to working from home.
Directors of limited companies can treat this as an allowable business expense, reducing their Corporation Tax. Self-employed individuals can include it as a simplified expense in their tax return. Employees may also qualify if they are required to work from home and do not receive reimbursement from their employer.
However, HMRC stresses that the claim must be based on a genuine business need. Optional or flexible arrangements may not qualify. For larger deductions, consider using proportional cost methods or setting up a formal rental agreement between yourself and your business.
Which Home Office Expenses Can You Claim from HMRC?
When using your home as an office, you may claim expenses that are wholly and exclusively for business use. These typically include utility bills, internet usage, cleaning costs, and certain types of insurance.
However, fixed costs like rent or mortgage are often excluded unless specific criteria are met. The method of claim significantly influences what can and cannot be included.
Are Utility Bills and Internet Charges Eligible for Deduction?
Yes, certain household bills such as heating, electricity, and broadband can be claimed, provided they are incurred as a direct result of working from home. If the internet or phone line is under a business contract, you may claim 100% of the cost.
Otherwise, only the proportion used for business is allowable. HMRC requires that the claims are supported with reasonable calculations or itemised bills, especially when the actual cost method is used.
For directors and employees, utility claims must align with the business-use percentage of the property to avoid overclaiming or attracting scrutiny during an audit.
Can You Include Equipment, Furniture, or Supplies?
Office equipment and furniture such as desks, chairs, laptops, printers, and storage units are claimable if used exclusively for business purposes.
These items typically fall under capital allowances like the Annual Investment Allowance (AIA). Stationery and consumables such as paper, pens, printer cartridges, and postage are also valid deductions. If an item has both business and personal use, only the business-use portion is claimable.
For limited company directors, these should be purchased by the company and logged accurately in the business accounts to qualify for Corporation Tax relief. Keep detailed receipts and usage records to support claims.
What About Rent, Mortgage, or Council Tax?
Generally, limited company directors cannot claim for rent or mortgage as these are fixed personal costs incurred regardless of business activity. However, self-employed individuals using the actual cost method may claim a proportion of these expenses.
To do so, you must calculate the business-use percentage of your home, typically based on room and time usage. Council tax is also claimable by the self-employed but not for limited companies unless using a formal Director’s Use of Home Agreement.
Always consult a tax advisor before including these in your claim to avoid penalties or unexpected tax implications such as Capital Gains Tax.
What Are the Three Main Methods for Claiming Use of Home as Office?
When claiming home office expenses for tax purposes, there are three primary methods approved by HMRC. Each approach suits different business circumstances, and choosing the right one can improve both tax efficiency and compliance.
HMRC Flat Rate Allowance
This is the most straightforward option. HMRC allows a flat rate of £6 per week (£312 per year) without the need for detailed evidence. It’s ideal for limited company directors or employees with minimal business use of their home.
Proportional Household Expenses Method
This method involves calculating the actual business use of your home. You’ll need to work out the percentage of your household used for business and how often.
You can claim costs like utilities, internet, and part of your rent or mortgage interest (if self-employed). It requires thorough record-keeping and justifications.
Director’s Use of Home Agreement
Limited company directors with significant home usage can create a formal rental agreement with their company. This allows the company to pay rent, which is an allowable expense.
However, it introduces personal tax obligations and potential CGT issues if the space is used solely for business. Choosing the right method depends on how extensively your home is used for work and the administrative effort you’re willing to commit to.
How Does HMRC’s Flat Rate Allowance Work?
HMRC’s flat rate allowance is designed for simplicity. Directors of limited companies or employees who work from home occasionally can claim £6 per week, totalling £312 annually.
This allowance covers general costs such as heating, lighting, and electricity. It does not require evidence or receipts, making it attractive for those with minimal home office usage. However, it doesn’t include internet, phone bills, or equipment.
This flat rate is a Corporation Tax-deductible expense for companies and must be correctly recorded in the business accounts. For employees, it can be claimed as tax relief if the employer doesn’t reimburse home-working costs.
Who Can Use the Simplified £6/Week Method?
The simplified flat rate of £6 per week is suitable for:
- Limited company directors with low home office use
- Employees required to work from home without employer reimbursement
- Businesses wanting a claim method with minimal paperwork
This method is not available to those working from home by choice or those whose contracts don’t require home working.
HMRC requires the use of your home to be necessary for business. While this method does not demand proof of expenses, it’s best suited to individuals who work part-time from home or infrequently.
Self-employed individuals can use a different flat rate scale depending on monthly hours worked. Always record in accounts or on your Self Assessment for accurate tax application.
What Are the Pros and Cons of the Flat Rate?
The flat rate method is ideal for simplicity, but it may not suit everyone. Here’s a breakdown: It’s a hassle-free method that allows a fixed weekly claim of £6. No receipts or percentage calculations are required.
For businesses with minimal home use, it provides a modest but fair deduction. However, it doesn’t account for internet, phone bills, or any capital expenses. It’s not suitable if your home usage is substantial, as you may be leaving money unclaimed.
| Pros | Cons |
| Easy to claim with no evidence | Doesn’t cover internet or phone bills |
| Acceptable for Corporation Tax | May underrepresent high home business use |
| No complex calculations needed | Limited to £312 annually |
Carefully assess your actual usage. If your work occupies more space or incurs higher costs, an alternative method may be more appropriate.
When Is It Better to Claim Proportional Household Expenses?
Claiming a proportion of household expenses is often more beneficial when your business usage of your home is significant or consistent.
This method requires careful calculations based on the percentage of your home used and the amount of time it’s used for business.
For example, if you use one room out of four for business 50% of the time, you might claim 12.5% of household running costs. These may include:
- Heating, electricity, and water
- Internet and phone (business portion)
- Insurance, cleaning, and repairs
- Rent or mortgage interest (if self-employed)
This method is better than the flat rate when:
- Your home office is used daily or full-time
- Actual costs exceed £312 per year
- You want to claim a broader set of expenses
However, this method also requires:
- Detailed records of bills and usage
- Calculations that justify your business proportions
- Readiness for HMRC scrutiny
If calculated and documented properly, this method can unlock a more accurate and higher claim, especially for home-based entrepreneurs and contractors.
Should Directors Set Up a ‘Use of Home’ Rental Agreement?
Limited company directors who use a significant portion of their home for business may consider setting up a formal rental agreement with their company.
This arrangement allows the director to receive rent, and the business can deduct it as an allowable expense. However, such agreements must be carefully structured and documented.
While potentially more lucrative than flat rate or proportion-based methods, rental agreements introduce personal tax responsibilities and require legal clarity to ensure the arrangement is viewed as legitimate by HMRC.
What Are the Tax Benefits and Risks of Charging Rent?
Charging rent through a Director’s Use of Home Agreement can offer substantial tax benefits. The business treats rent as an allowable expense, reducing Corporation Tax liability.
This method can yield higher claims than flat-rate or proportional methods if calculated appropriately.
However, the income is taxable to the director and must be declared on their Self Assessment return. Furthermore, if the home space is used solely for business, it may attract Capital Gains Tax upon sale.
| Tax Benefit | Tax Risk |
| Business claims rent as expense (reduces CT) | Director must declare income (increases personal tax) |
| Larger claims possible with proper setup | CGT risk if space is exclusive to business use |
| Greater flexibility in cost coverage | Requires proper legal agreement |
To maximise benefit and minimise tax exposure, it’s strongly advised to seek professional advice before setting up such agreements.
Are There Capital Gains Tax Implications?
Yes, there can be Capital Gains Tax (CGT) implications when you claim a portion of your home as exclusively for business use. Typically, your main residence qualifies for full CGT relief when sold.
However, if part of your home is designated solely as a business workspace, especially under a formal rental agreement, HMRC may treat it as non-residential, making it liable for CGT.
To avoid this, many individuals ensure the office space remains dual-purpose, such as using it occasionally as a guest room. Always consider future property sales when structuring home office arrangements.
How Do Home Office Claims Differ for the Self-Employed?
Self-employed individuals have more flexible options compared to company directors. They can choose between HMRC’s simplified expenses or claim a proportion of actual costs.
The simplified method lets them claim a fixed monthly rate depending on hours worked from home:
| Monthly Hours Worked | Flat Rate Allowed |
| 25 to 50 | £10 |
| 51 to 100 | £18 |
| 101 or more | £26 |
Alternatively, self-employed workers may calculate a business-use percentage of home running costs, such as:
- Mortgage interest or rent
- Utilities
- Insurance
- Council tax
- Internet and phone charges
The proportional method can lead to higher allowable expenses but requires more detailed recordkeeping and effort. Unlike directors, self-employed individuals may claim a portion of their rent or mortgage interest, offering a key advantage.
However, all claims must be justifiable, with clear business-use assessments and documentation to satisfy HMRC
What Records Should You Keep to Support a Home Office Claim?
Maintaining detailed records is essential for any use of home as office claim. Whether you opt for the flat rate, proportional expenses, or a formal agreement, HMRC expects clear documentation to support your claim.
Required documentation includes:
- Copies of utility bills (electricity, gas, internet)
- Receipts for equipment or supplies used in your home office
- Evidence of room usage and hours worked from home
- Calculations used to determine business-use percentages
- Records of formal agreements, if applicable
- Notes on any internet or phone use logs showing business relevance
- Correspondence or documentation showing work-from-home necessity
For those using the flat-rate method, minimal records are enough, but it’s wise to note which weeks you worked from home.
If you claim using actual costs or a rental agreement, your documentation must be accurate and consistently maintained. HMRC advises keeping all records for six years to avoid rejected claims or future reassessments.
What Are the Common Mistakes to Avoid When Claiming WFH Expenses?
While claiming work-from-home (WFH) expenses can provide legitimate tax relief, many taxpayers make avoidable mistakes that can trigger HMRC scrutiny or reduce allowable deductions. Understanding and avoiding these common errors is crucial for ensuring your claims are valid and effective.
Key mistakes to avoid include:
- Overclaiming costs: Attempting to deduct personal expenses such as full internet bills, non-exclusive room usage, or entire rent payments can result in penalties.
- No record-keeping: Failing to document your calculations, usage logs, or receipts can lead to disallowed claims during an HMRC audit.
- Not adjusting for mixed-use areas: Claiming 100% of expenses for rooms not used solely for business violates HMRC rules. Shared spaces must be adjusted proportionately.
- Using the wrong method: Sticking to the flat rate when your actual costs are significantly higher can lead to under-claiming. Conversely, opting for actual costs without proper records invites errors.
- Ignoring CGT implications: Claiming a room exclusively for business may affect Capital Gains Tax relief on future property sales.
Review your home office arrangement annually, consult a tax advisor where needed, and keep everything documented. This ensures you remain compliant while optimising your WFH claims.
Conclusion
Claiming use of home as office allowance in 2024/25 can provide valuable tax savings, whether you’re a limited company director, self-employed worker, or an employee required to work remotely.
From the flat-rate method to proportional expense claims or formal rental agreements, there’s a method suited to your situation. Understanding HMRC guidelines, keeping meticulous records, and avoiding common pitfalls are key to staying compliant.
With rising energy costs and flexible working arrangements becoming the norm, making full and accurate use of home office allowances is more important than ever. If unsure, consult a tax professional to ensure you’re maximising your entitlement responsibly.
FAQs About Use of Home as Office Allowance in 2024/25
Can Limited Company Directors Deduct Broadband Costs?
Directors can claim broadband costs if the contract is in the company’s name and used solely for business. If the broadband is personal, only the business-use percentage can be claimed with appropriate evidence.
Does the Use of a Spare Bedroom Affect Capital Gains Tax?
Yes, if a room is used exclusively for business, it may lose private residence relief and attract CGT upon selling the property. To avoid this, it’s advisable to maintain dual-use, such as using it occasionally as a guest room.
Can I Switch from Flat Rate to Actual Cost Method Mid-Year?
HMRC permits changing methods if supported by evidence, but you must apply one method consistently within the accounting period. Any switch should be properly documented and justified in your tax records.
How Do I Claim WFH Allowance Without a Separate Office?
You can still claim if part of your home is used regularly and exclusively for business during working hours. Documented calculations and records of usage are required for compliance.
Are Home Office Claims Audited by HMRC?
Yes, HMRC may audit claims, especially if they appear excessive or inconsistent. Accurate record-keeping and logical justifications can protect you during a review.
Can Employees Still Claim WFH Relief After COVID Policies Ended?
Employees can only claim WFH relief if working from home is a requirement of their job, not a personal choice. Claims must meet strict eligibility criteria set by HMRC.
Is It Worth Consulting a Tax Advisor for Small Claims?
Yes, even for small claims, an advisor can help ensure accuracy and prevent mistakes. They can also identify better claim methods based on your circumstances.
