HMRC's Flat Rate for Home Working: What the Monthly Allowances Cover

HMRC's flat rate for home working gives a sole trader a fixed monthly deduction of £10, £18 or £26 depending on the number of hours worked from home each month, and it covers heating, lighting and power only. The rate is £10 a month for 25 to 50 hours, £18 a month for 51 to 100 hours, and £26 a month for 101 hours or more. Because the flat rate is designed to remove the need for record keeping rather than to reflect the true cost, it is often the smaller of the two available claims. Understanding home office expenses self-employed UK rules therefore means understanding what the flat rate excludes as much as what it includes. Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice, reviews home working claims for sole traders across the UK. This article sets out the current rates, what each one covers, what can still be claimed alongside them, and how the actual cost method compares.

Key Takeaways

• HMRC's simplified expenses flat rate for home working is £10 a month for 25 to 50 hours, £18 a month for 51 to 100 hours, and £26 a month for 101 hours or more in 2026/27.
• The maximum flat rate claim is £312 for a full tax year, based on £26 a month for twelve months.
• The flat rate covers heating, lighting and power only, so telephone and broadband costs can still be claimed separately on a business use proportion.
• The actual cost method allows a proportion of rent, mortgage interest, council tax, water, insurance, electricity, gas and repairs, apportioned by room and by time.
• Only hours spent wholly and exclusively on business count towards the monthly hours bands, and the hours must be recorded to support the claim.
• Sole traders with qualifying income above £50,000 have been within Making Tax Digital for Income Tax since 6 April 2026 and must record home working costs digitally.

What are HMRC's flat rate home working allowances in 2026/27?

HMRC's flat rate home working allowances are banded by hours worked at home each month: £10 for 25 to 50 hours, £18 for 51 to 100 hours, and £26 for 101 hours or more. Fewer than 25 hours in a month means no flat rate claim at all for that month.

The bands are applied month by month rather than averaged over the year, which matters for anyone whose workload is seasonal. A working from home sole trader who spends 130 hours at home in January but only 20 hours in July claims £26 for January and nothing for July.

The allowance sits within HMRC's simplified expenses regime, introduced to spare unincorporated businesses the burden of apportioning household bills. It is available to sole traders and partnerships, but not to limited companies, which use a separate set of rules for directors working from home.

Hours count only where the work is genuinely business activity carried out at the home premises. Checking email on a phone in the evening does not turn an hour into a claimable one, and HMRC expects a contemporaneous record of hours if a home office claim HMRC might review is to stand up.

What do the monthly flat rate allowances actually cover?

The flat rate covers the additional household running costs of heating, lighting and power, and nothing else. It does not cover rent, mortgage interest, council tax, water rates, insurance, repairs, telephone or broadband.

That exclusion is the most valuable feature of the flat rate rather than a drawback. Telephone and internet costs can be claimed separately, in addition to the flat rate, on the proportion attributable to business use. A sole trader paying £45 a month for broadband and using it 60% for business claims £324 for the year on top of the flat rate.

Where a dedicated business phone line or mobile contract exists in the trading name, the full cost is deductible with no apportionment at all. The same applies to office equipment, furniture and software used in the home office, which fall under capital allowances or the annual investment allowance rather than the household running costs regime.

For the full picture of what can and cannot be claimed when working from home, see our guide to allowable expenses for the self-employed.

When does the actual cost method beat the flat rate?

The actual cost method beats the flat rate whenever the business proportion of household running costs exceeds £312 a year, which is the case for most sole traders who rent or hold a mortgage and use a room regularly.

The actual method works by apportioning total household costs twice: first by area, usually by counting rooms and excluding kitchens, bathrooms and hallways, and then by time, reflecting the proportion of the week that the room is used for business. Allowable costs include rent, mortgage interest (but never capital repayments), council tax, water rates, buildings and contents insurance, electricity, gas, and repairs to the room concerned.

The trade off is record keeping. The actual method requires bills, a defensible room count and a note of business use patterns, whereas the flat rate requires only an hours log. For someone working two days a week from a spare bedroom in a small flat, the additional relief may not justify the extra work. For a full-time working from home sole trader, it usually does.

Worked example: flat rate against actual costs for a sole trader

A sole trader with £21,120 of annual household costs and one room in six used for business five days a week can claim £2,514 under the actual method, against £312 under the flat rate.

Take a freelance designer in Guildford working 120 hours a month from home. Her annual household costs are rent of £16,800, council tax of £2,100, gas and electricity of £1,900 and contents insurance of £320, totalling £21,120. The property has six rooms once the kitchen, bathroom and hallway are excluded, and she uses one of them as her office five days out of seven.

The area apportionment gives £21,120 divided by six, or £3,520. The time apportionment gives £3,520 multiplied by five sevenths, or £2,514.

The flat rate claim would be £26 a month for twelve months, or £312. The actual method therefore produces £2,202 of additional deduction. With profits in the basic rate band she pays income tax at 20% and Class 4 National Insurance at 6%, a combined 26%, so the larger claim saves £572 in tax and National Insurance for the year.

How does Making Tax Digital change home working claims?

Making Tax Digital for Income Tax has applied since 6 April 2026 to sole traders and landlords with qualifying income above £50,000, and those businesses must keep digital records of expenses and submit quarterly updates followed by a final declaration by 31 January.

For home working, that means the flat rate or the actual cost apportionment needs to be captured in compatible software rather than reconstructed from a shoebox of bills the following January. The threshold falls to £30,000 from April 2027 and to £20,000 from April 2028, so most self-employed people will be within the regime within two years.

Sole traders below the current £50,000 threshold continue to file a single self-assessment return by 31 January, but the underlying record keeping requirement to support a home office claim HMRC could enquire into is unchanged.

Frequently Asked Questions

How much can I claim for working from home as a sole trader in 2026/27?

A sole trader using HMRC's simplified expenses flat rate can claim £10 a month for 25 to 50 hours of home working, £18 a month for 51 to 100 hours, and £26 a month for 101 hours or more, giving a maximum of £312 for a full tax year. The alternative actual cost method has no fixed cap and often produces a much larger deduction.

Does HMRC's flat rate cover broadband and telephone costs?

No. HMRC's flat rate for home working covers heating, lighting and power only. Telephone and broadband costs are claimed separately on top of the flat rate, based on the proportion of business use. A £45 monthly broadband bill used 60% for business supports a separate claim of £324 for the year.

Can I claim mortgage interest when working from home?

Yes, a sole trader using the actual cost method can claim a proportion of mortgage interest, apportioned by the rooms used for business and the time they are used. Capital repayments on the mortgage are never deductible, only the interest element. The flat rate method does not allow any mortgage interest claim.

Will claiming home office expenses affect capital gains tax when I sell my home?

Claiming home office expenses does not normally affect private residence relief, because the room is used for business only part of the time and retains a private use. Capital gains tax exposure arises only where part of the property is used exclusively for business with no private use at all, which most sole traders should avoid.

Do I need to record the hours I work from home?

Yes. HMRC expects a record of hours worked at home each month to support a flat rate claim, because the deduction depends entirely on which hours band applies. A simple diary or spreadsheet updated monthly is sufficient, and sole traders within Making Tax Digital for Income Tax should keep that record in compatible software.

How Blue Tick Can Help

Most sole traders default to the flat rate because it is simpler, and in doing so leave several hundred pounds of relief unclaimed every year. Blue Tick Accountants compares both methods on your actual household costs, documents the apportionment so it withstands an HMRC enquiry, and makes sure the claim is recorded correctly under Making Tax Digital for Income Tax. Head to our website and book a meeting now.

Conclusion

The flat rate is a convenience, not a valuation, and at a maximum of £312 a year it rarely reflects what home working actually costs. Run both calculations before filing, because for anyone using a room regularly the actual cost method typically produces several times the deduction for an hour of extra work. Whichever method you choose, record the hours and keep the bills, because a home working claim without supporting evidence is the easiest deduction for HMRC to remove.

About the Author

This guide was written by Leon, founder of Blue Tick Accountants, a Guildford-based UK tax advisory and accountancy practice that helps self-employed people, landlords and limited company owners across the UK. Leon advises sole traders on allowable expenses, self-assessment and Making Tax Digital compliance. It was last reviewed for the 2026/27 tax year.

This article is intended for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are subject to change and their application will depend on your individual circumstances. You should always seek advice from a qualified professional before taking action. Blue Tick Accountants accepts no liability for decisions made on the basis of this content.

Related reading: Dedicated Home Office vs Using a Room Occasionally: What HMRC Accepts.