Self Assessment Working From Home: What You Need to Know

Working from home can offer tax benefits, but knowing how to claim them correctly is essential. If you’re self-employed or filing a Self Assessment tax return, you may be able to deduct home office expenses to lower your taxable income. However, strict rules govern what can be claimed, so careful documentation and accurate calculations are necessary.

Allowable Home Office Deductions

Certain household expenses can be deducted if they are incurred solely for business purposes. HMRC allows self-employed individuals to claim a portion of costs such as utilities, rent or mortgage interest, council tax, and broadband—limited to the business-related portion.

Heating and electricity are commonly claimed since they directly support a home office. If a room is used exclusively for work, a proportion of energy costs can be deducted. Internet and phone bills can also be partially claimed, but only for business use. If a phone line is shared, only business-related calls are deductible, requiring itemized records.

Renters can claim a portion of rent, while homeowners may deduct mortgage interest but not principal repayments. Council tax can also be apportioned based on business use. Insurance premiums may be deductible if they specifically cover business assets or liability. Repairs and maintenance costs can be claimed if they relate to the workspace, such as fixing office wiring, but general home improvements are not allowable.

Calculating Business-Use Percentages

Allocating household expenses between personal and business use must be done using a reasonable method. HMRC does not mandate a specific formula, but the calculation must be justifiable. A common approach divides costs based on the number of rooms in the home and the time each space is used for work.

For example, if a property has five rooms and one is used exclusively for business, 20% of relevant expenses can be allocated. If that room is only used for business half the time, the deductible percentage is reduced.

Another method considers the hours a workspace is used. If a dining room serves as an office for eight hours each weekday, the business-use percentage should reflect that. This approach is useful for those who work irregular hours or share spaces for different purposes.

Documenting and Recording Expenses

Accurate records are essential to substantiate deductions. Without proper documentation, HMRC may disallow claims, leading to additional tax liabilities or penalties.

Receipts, invoices, and bank statements should be retained for all business-related expenses. Digital copies are acceptable, and accounting software can simplify record-keeping. HMRC’s Making Tax Digital (MTD) initiative encourages digital record-keeping, and self-employed individuals above the VAT threshold are already required to comply. While MTD for Income Tax Self Assessment (ITSA) has been delayed until April 2026 for most businesses, adopting digital tools now can ease future reporting.

If an expense is shared between personal and business use, a written record explaining the business-use percentage helps justify the claim. A simple spreadsheet tracking monthly costs can prevent errors and clarify deductions during an HMRC review.

Reporting Costs on Your Return

Home office expenses are reported under “Other allowable business expenses” when filing a Self Assessment tax return. Those using the SA103F form report them under the “Self-employment (full)” section, while those with an annual turnover below £85,000 use the SA103S form under the “Self-employment (short)” section.

Simplified expenses offer an alternative to exact calculations. This method, available to sole traders and partnerships without corporate partners, allows a flat monthly rate based on hours worked from home. For example, working 25 to 50 hours per month permits a £10 deduction, 51 to 100 hours allows £18, and 101 or more hours qualifies for £26. While convenient, this approach may not always yield the highest deduction, so comparing both methods before filing is advisable.

Retaining Records for Reviews

Self-employed individuals must keep financial records for at least five years after the 31 January filing deadline for the relevant tax year. If HMRC initiates an inquiry, well-organized documentation can prevent disputes and reduce the risk of penalties.

Records should include invoices, receipts, bank statements, and calculations used to determine business-use percentages. If expenses are allocated based on room usage or time spent working from home, a written explanation of the methodology strengthens the claim. Digital storage solutions, such as cloud-based accounting software, help maintain records securely and ensure easy access. If deductions are questioned, clear documentation will be essential to demonstrate compliance.