Claiming Work from Home Relief: Are You Missing Out?

If you've worked from home at any point during the 2024/25 tax year – whether you're self-employed, an employee, or a combination of both – you may be entitled to claim tax relief on your household costs. Despite being one of the most common tax reliefs available, it's frequently overlooked or claimed incorrectly. Today, we'll explain exactly what you can claim and how to claim it.

Who Can Claim?

You can claim work from home relief if:

• You're required to work from home by your employer (not just choosing to)
• You're self-employed and work from home regularly
• You have no suitable alternative workplace available
• Working from home is substantive (not just occasionally checking emails)

Relief for Employees

If you're an employee who works from home, you have two options:

Option 1: The Simplified Flat Rate

HMRC offers a simplified rate of £6 per week (£312 per year) without needing to prove your actual costs. This is claimed through Self Assessment or by contacting HMRC directly.

For a basic-rate taxpayer, this gives tax relief of £62.40 per year (20% of £312). For higher-rate taxpayers, it's £124.80 (40% of £312).

Option 2: Claim Actual Costs

If your actual costs exceed the flat rate, you can claim the additional household expenses you incur from working from home, such as:

• Increased heating costs
• Additional electricity
• Business phone calls
• Internet costs (business proportion)

However, you cannot claim for mortgage interest or rent, Council Tax, water rates, or items you'd pay for anyway (your existing internet package, for example).

To claim actual costs, you need to calculate the business proportion. For example, if you work 40 hours per week and use a room for 8 hours per day, 5 days a week, you're using that room for approximately 24% of the time (40 hours out of 168 hours in the week). You could then claim 24% of the room's heating and electricity costs.

When to Use Each Method

• For most employees working from home regularly, the flat rate of £6 per week is simpler and provides reasonable relief without the paperwork
• If you work from home full-time in a dedicated home office and pay significant utility bills, calculating actual costs might give you a higher claim

Relief for the Self-Employed

If you're self-employed and work from home, you can claim a proportion of your household expenses as an allowable business expense. This directly reduces your taxable profit and therefore your tax bill.

Option 1: Simplified Expenses

HMRC provides a flat rate based on hours worked from home per month:

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

This method requires no receipts or calculations and is popular with freelancers and sole traders with straightforward home working arrangements.

Option 2: Actual Costs

Alternatively, calculate the actual costs of running your home office. This typically gives higher relief if you:

• Work from home full-time
• Have a dedicated room used exclusively for business
• Have high household costs

What You Can Claim

You can claim a proportion of:

• Mortgage interest (but NOT capital repayments)
• Rent
• Council Tax
• Buildings and contents insurance
• Utility bills (gas, electricity, water)
• Internet and telephone costs
• Cleaning and maintenance

Calculating Your Business Proportion

There are two common methods:

Method 1: Rooms Method

If your house has 5 rooms and you use one exclusively for business, you can claim 1/5 (20%) of your household costs. However, HMRC may argue that kitchens, bathrooms, and hallways aren't "rooms" for this purpose, so be prepared to justify your calculation.

Method 2: Time and Space Method

This is more accurate but more complex. Calculate:

1. What proportion of your home is used for business (e.g., 15% if using one room)
2. What proportion of time it's used for business (e.g., 40 hours out of 168 hours per week = 24%)
3. Multiply these together (15% × 24% = 3.6%)

Using this method, you'd claim 3.6% of your household expenses.

Example Calculation

Let's say you work from home full-time (40+ hours per week) in a dedicated home office that represents 10% of your home's floor space:

Annual household costs:

• Rent: £12,000
• Council Tax: £2,000
• Utilities: £1,800
• Internet: £600
• Insurance: £400
• Total: £16,800

Business proportion (10% of space, 24% of time): 2.4%

Allowable expense: £16,800 × 2.4% = £403 per year

If you're a higher-rate taxpayer, this reduces your tax bill by £161 per year. That's better than the simplified rate of £312, which would save you £125.

However, if you work 60+ hours per week from a dedicated office (15% of space, 36% of time = 5.4% business use):

Allowable expense: £16,800 × 5.4% = £907 per year

At higher-rate tax, this saves you £363 – significantly more than the simplified rate.

Capital Gains Tax Consideration

Here's an important warning: if you claim a proportion of your home costs as a self-employed person and you're claiming for a specific room, you may create a Capital Gains Tax liability when you sell your property.

Normally, your main residence is exempt from Capital Gains Tax through Private Residence Relief. However, if part of your home has been used exclusively for business, that proportion may not qualify for relief.

Example: You sell your house for £100,000 more than you paid. If 10% was a business office, you might owe Capital Gains Tax on £10,000 of the gain.

How to Avoid This:

• Don't use the room exclusively for business – use it as a spare bedroom or study too
• Use the simplified expenses method instead of claiming actual costs
• Be realistic about business use percentage

For most people working from home, the simplified expenses route avoids this issue entirely.

How to Claim

Employees:

• Include in your Self Assessment return in the "Employment" section under expenses
• Or contact HMRC to adjust your tax code if you don't complete a return

Self-Employed:

• Include as a business expense on your Self Assessment return
• Use the "simplified expenses" box if using flat rates
• Include in "other business expenses" if claiming actual costs

Common Mistakes to Avoid

• Claiming when not eligible: If you choose to work from home for convenience but could work elsewhere, you're not eligible
• Claiming too high a percentage: Be realistic and able to justify your calculation
• Claiming private costs: Only business-related additional costs qualify
• Not keeping records: Keep utility bills, rent/mortgage statements, and council tax bills for at least five years
• Double-claiming: Don't claim the same costs through both simplified and actual methods

Backdating Claims

You can backdate claims for work from home relief for up to four tax years. If you worked from home during the pandemic but never claimed, you could potentially claim for 2020/21, 2021/22, 2022/23, and 2023/24 if you haven't already.

Is It Worth Claiming?

For employees: The flat rate of £6 per week is simple and always worth claiming if you work from home regularly. It costs nothing to claim and provides automatic relief.

For self-employed: Compare the simplified expenses against actual costs. Work fewer than 50 hours per month from home? Simplified is easier. Work 100+ hours with a dedicated office? Calculate actual costs – you'll likely claim more.

Record-Keeping

Keep:

• Utility bills showing costs
• Council Tax bills
• Rent or mortgage statements
• Evidence of business use (diary, timesheets, etc.)
• Floor plans if claiming based on room size

Need Help Calculating?

If you're uncertain which method gives you the best tax relief, or you're worried about Capital Gains Tax implications, it's worth getting professional advice. The difference between methods can be hundreds of pounds per year.

Want to ensure you're claiming the maximum work from home relief available? MCC Partners can review your circumstances and calculate the most tax-efficient approach. Our experienced team at our Gravesend office provides comprehensive tax planning services for employees and self-employed individuals throughout Kent. Contact us on 01474 619 990 or email This email address is being protected from spambots. You need JavaScript enabled to view it..