Claiming business expenses from home is one of the easiest ways to trim your tax bill, yet plenty of self-employed women either skip it or default to the flat rate without checking whether the actual cost method would put more money back in their pocket. A large share of women-led businesses in the UK begin at a kitchen table or in a spare room, so the costs of running that space are real business costs. Knowing which ones qualify, and how to calculate the business portion, can save you hundreds of pounds a year.
What counts as a business cost when working from home
HM Revenue & Customs (HMRC) allows self-employed people to claim a proportion of dual-use household costs as allowable expenses. According to HMRC guidance on GOV.UK, these include heating, electricity, Council Tax, rent or mortgage interest, and internet and telephone use. You can apportion contents insurance in the same way, along with water rates where business use of water is more than minimal. Only the business proportion of each cost qualifies. Expenses must be wholly and exclusively for trade purposes, or apportioned reasonably where they have mixed use. Costs that benefit personal life, such as groceries, private travel or domestic improvements, are not allowable. HMRC’s Business Income Manual confirms that you may apportion costs by room count, floor area or time. So even modest but regular business use of a room can justify claiming a reasonable proportion of household bills.
How to work out proportions with actual costs
The actual cost method often gives a larger deduction than flat rates. This is particularly true if you have a dedicated home office or high fixed housing costs. To use it, you need reasonable calculations for each cost you want to claim.
Choose your apportionment method
- By rooms: divide costs by the number of rooms; the business room carries that share. For example, one office in a five-room house gives 20%.
- Rooms and time: also adjust for how many hours or days the room is used for business compared with private use. If you work there three days a week and use it personally in the evenings, the time share reduces the claim accordingly.
- Floor area: for open-plan or shared spaces, use measured floor area rather than room count.
Example using actual costs
Consider Sarah, working from home in 2026. She lives in a five-room house and uses one room as an office for about 60% of her working hours. Her annual bills are:
| Bill | Total cost | Room share (1/5) | Claimable (after 60% time share) |
|---|---|---|---|
| Electricity | £1,400 | £280 | £168 |
| Gas (heating) | £1,000 | £200 | £120 |
| Council Tax | £1,800 | £360 | £216 |
| Broadband/Phone (business use estimated at 50%) | £480 | n/a | £240 |
| Insurance | £360 | £72 | £43 |
| Total | n/a | n/a | £787 |
(Figures rounded to the nearest pound.) Those who dedicate a room exclusively to work often find actual cost claims substantially exceed the simplified flat-rate allowance.
Simplified expenses: the flat-rate method
If you work from home for 25 hours or more a month, HMRC lets sole traders and partnerships (but not limited companies) use simplified expenses. Instead of detailed calculations for heating, electricity and Council Tax, you apply a flat monthly rate. The rates have remained unchanged since 2013 and still apply for 2026/27, under HMRC’s simplified expenses guidance. They are: 25–50 hours a month = £10; 51–100 hours = £18; 101 hours or more = £26. The flat rate replaces the business proportion of home running costs. You cannot combine it with the actual cost method for the same costs.
Here is the catch: those rates have been frozen since 2013, while energy bills have climbed sharply. If your household costs are high, that freeze is reason enough to run the actual cost calculation before accepting the flat rate. Simplified expenses suit those with modest bills or irregular hours, where the admin saving outweighs a smaller deduction. And if your business fits around school hours or caring responsibilities, count your monthly hours first: below 25 hours a month you cannot use the flat rate at all, but you can still claim a proportion of actual costs.
Differences for employees and the self-employed
Employees face different rules. From 6 April 2026, employees can no longer claim tax relief for working from home. The flat-rate £6-a-week allowance (£312 a year, a rate unchanged since April 2020) was abolished for 2026/27 onwards. The change was announced at the Autumn Budget 2025. Employers can still choose to reimburse homeworking costs. However, such reimbursements no longer qualify for the tax exemption and will normally be taxable.
Self-employed people, by contrast, can still use either the actual cost proportion or simplified expenses when claiming business expenses from home. The self-employment pages of the Self-Assessment return (SA103) let you record business use of home. You can record it within your rent, rates, power and insurance costs, or through the simplified expenses boxes.
Practical steps to make your claim robust in 2026
- Keep bills and invoices for utilities, rent or mortgage interest, internet and insurance. Evidence is vital if HMRC questions your claim.
- Maintain records of rooms used, hours worked and floor area. A simple spreadsheet or diary supports time-share calculations.
- Decide early whether you will use actual costs or simplified expenses for each tax year. You cannot mix the two methods for the same costs.
- For limited companies, the company usually meets home office costs by reimbursing the director rather than claiming them directly. Simplified expenses are not available to companies. From 6 April 2026, such reimbursements no longer benefit from the homeworking tax exemption, so take advice on how they are structured. If you are still weighing up your structure, our guide to sole trader versus limited company sets out the wider tax trade-offs.
- Calculate both methods (flat rate versus actual cost) and choose the one that gives the larger deduction. Balance this against your time and admin overhead.
Common pitfalls to avoid
- Overclaiming costs: claiming for the whole year without adjusting for private use.
- Using the same room for business and personal purposes without adjusting the time share properly.
- Mortgages: never claim capital repayments; only the interest element counts.
- Lack of evidence: failing to keep bills, or failing to document usage hours and room proportions.
- Claiming expenses that are not wholly and exclusively business related, such as general home decoration or shared spaces that are mostly personal.
- Using the old £6-a-week employee relief for 2026/27 onwards; it has been abolished for employees.
The bottom line
Do the sums once a year. If you have a dedicated workspace and sizeable bills, the actual cost method will usually beat a flat rate that has not moved since 2013. If your hours are irregular and your bills modest, take the simplified rate and put the saved admin time into earning instead. Either way, keep the evidence: a claim you cannot back up is a claim you may have to repay.
Sources: HMRC, Expenses if you’re self-employed; HMRC, Simplified expenses: working from home; HMRC Business Income Manual BIM47820: specific deductions, use of home; HM Treasury, Autumn Budget 2025 (removal of employee homeworking expenses relief from 6 April 2026).
For related help, see our guide on how much you can borrow to boost your cash flow, and our practical article on business insurance for sole traders. Both are relevant when managing home-based business finances.
