A Room, a Ratio and a Reason: Home-Office Claims for 2026/27

Working from home is rarely a single, tidy arrangement. One week it is a laptop at the kitchen table; the next it is a spare room with a filing cabinet and a second screen. For tax purposes, the question is not whether the arrangement feels like work. It is whether the claim can be explained, supported and defended if HMRC asks. For 2026/27, sole traders and company directors need different routes to the same principle: claim only the business share, and keep the working papers.

Start with the pattern of work, not the bill

A use of home claim begins with the business pattern. How often is the space used? Is it a dedicated room or a corner of a shared room? Does the same space have a private use? HMRC does not require a separate office, but the expense must be incurred wholly and exclusively for the business. In practice, that means the claim should reflect a genuine business use rather than a general contribution towards household living costs.

A sole trader who does occasional admin at the kitchen table is in a different position from one who uses a spare room for client calls, records and stock. The first may find the simplified flat rate adequate. The second may have a stronger case for a proportionate actual-costs claim. Neither route should be chosen simply because it produces a larger number.

The simplified flat rate: fixed, simple, not universal

The simplified expenses regime allows sole traders and business partners to claim a fixed monthly amount for working from home. The monthly bands are £10 for 25 to 50 hours, £18 for 51 to 100 hours and £26 for 101 hours or more. The flat rate is designed to cover the household running costs within its scope, including heating, electricity, council tax, mortgage interest or rent, and internet and telephone line costs. Those costs should not then be claimed again separately.

The attraction is simplicity, but it is not available to limited companies. A company cannot use the simplified flat rate to claim a director or employee's home costs. Nor is the flat rate available where monthly business use falls below 25 hours. In that case, a proportionate actual-costs claim may still be possible, but it needs a defensible method.

Evidence for the flat rate is mainly about hours. A monthly log showing the days and hours worked at home is more useful than a general statement that the kitchen table is used for paperwork. The log does not need to be elaborate, but it should be contemporaneous and consistent with the business records.

A proportionate actual-costs claim: method before arithmetic

An actual-costs claim starts with an allowable household cost and applies a business-use proportion. There is no single prescribed formula. A reasonable method might use the number of rooms or floor area to establish the share of the home used for business, with a further adjustment for time where a room is used only part of the week for work. The key is consistency and explanation.

Revenue costs such as heating, electricity, council tax, rent and mortgage interest may be included in proportion. Capital costs, mortgage capital repayments and private household spending are not allowable. A claim for the whole broadband bill or the whole winter heating bill is unlikely to be defensible simply because the business is run from home.

A short method note is worth more than a carrier bag of bills. It should state the rooms or area used, the business-use percentage, the costs included, and why the ratio is fair. If the method changes, record why. HMRC is more likely to accept a modest, explained claim than an aggressive one with no working papers.

Broadband, heating and mortgage interest

Broadband is commonly overstated. If the connection is used privately as well as for business, claim only the business proportion, supported by a reasonable estimate of use. If the simplified flat rate is used, do not add broadband on top. The same discipline applies to heating and electricity: the claim should reflect the additional business use, not the full domestic bill.

Mortgage interest needs particular care. A sole trader may claim a proportionate share of mortgage interest as a business expense, but not the capital repaid. The lender's annual statement is the evidence to keep. A company director cannot normally claim personal mortgage interest through the company. The company's deduction depends on what it is paying for and to whom, not on the director's domestic mortgage.

Directors: allowance or reimbursement, not simplified expenses

A company cannot use the simplified flat rate, but it may pay an exempt homeworking allowance to an employee. Where a director is also an employee, the familiar allowance of £6 per week or £26 per month can be paid without a P11D, provided the conditions are met. It is a modest, administratively simple route for regular home working.

Alternatively, the company may reimburse actual additional household costs. That requires evidence and a clear link to business use. A company should not simply pay a director's household bills and treat them as business expenses. If a director charges the company rent for use of home, the arrangement needs a licence or agreement and the director may have property income to report. Before granting a company exclusive occupation of a room, take advice: occupation rights and capital gains tax relief are not purely a deduction question.

The evidence file to keep

A defensible claim usually contains a method note, a simple floor plan or room count, a diary or hours log, relevant bills, the mortgage interest statement where applicable, broadband usage evidence, and the calculation itself. Keep these with the business records. Self assessment records should generally be kept for five years after the submission deadline; company records generally for six years from the end of the accounting period.

Common traps and an annual review

The recurring mistakes are familiar: claiming the whole broadband bill, adding household bills to the flat rate, deducting mortgage capital, failing to record hours, and treating a director's home costs as company expenses without an allowance or reimbursement. A brief annual review is the best safeguard. Recalculate the business proportion, check the hours log, and consider whether the simplified flat rate or an actual-costs claim gives the clearer and more supportable result for 2026/27. The aim is not the largest claim. It is the claim that can be explained calmly, with a room, a ratio and a reason.