Home Office Expenses: Simplified vs Actual Method for the Self-Employed

Why Claiming Home Office Expenses Matters

Working from home has genuine costs — heating, electricity, broadband, and more. As a self-employed worker in the UK, HMRC allows you to offset a fair proportion of these against your taxable profits. Fewer taxable profits means a lower tax and National Insurance bill. Yet many freelancers either skip this claim entirely or use the wrong method for their situation. Here is how to get it right for the 2025/26 tax year.

Method One: The Simplified Expenses Flat Rate

HMRC's simplified expenses scheme lets you claim a flat monthly amount based on how many hours per month you work from home. There is no need to calculate actual bills or keep utility receipts. The current flat rates are:

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

To use this method, simply total your working-from-home hours each month, apply the relevant rate, and enter the annual figure in the expenses section of your Self Assessment return. You must keep a basic log of your hours in case HMRC queries your claim.

Who this suits: Freelancers with relatively low household bills, those who rent and have modest utility costs, or anyone who wants a straightforward, low-admin approach.

Method Two: Actual Costs (The Proportion Method)

If your household bills are substantial, the actual cost method will usually yield a larger deduction. Here you calculate the realistic business proportion of your allowable household expenses.

Allowable costs typically include:

• Gas and electricity
• Water rates (if relevant to your work)
• Broadband and phone bills (business-use proportion)
• Mortgage interest or rent
• Council Tax
• Buildings and contents insurance

The most common approach is to divide costs by the number of rooms in your home and then apply a time-use percentage. For example, if you have six rooms and use one exclusively for work, that is one-sixth of your total household costs. If that room is used for work roughly 60 percent of the time (say, eight hours out of a 24-hour day), your claimable proportion would be one-sixth multiplied by 60 percent.

Important caveat on mortgage interest: You can only claim the interest element, not capital repayment. Also, if you designate a room exclusively for business use, you may face a partial Capital Gains Tax liability when you sell your home, so many freelancers avoid exclusive-use designation and instead claim a reasonable mixed-use proportion.

Who this suits: Freelancers working full-time from a dedicated home office, those with higher household bills, or anyone in a larger property where the proportional calculation returns a meaningful figure.

Which Method Should You Choose?

Run the numbers for your own situation before filing. A full-time freelancer paying £2,400 a year in combined utilities and council tax, with six rooms and working around half the day in their home office, might reasonably claim £200 or more using the actual method — far exceeding the £312 flat-rate maximum for high-hour users. Conversely, someone in a small flat with low bills may find the flat rate perfectly adequate and far simpler to administer.

Record-Keeping Tips

• Keep monthly utility bills and broadband statements for at least five years after the relevant tax return deadline
• Maintain a simple log of working hours if using the flat-rate method
• Document your room-use calculation so you can justify it to HMRC if asked
• Review your method each tax year — your circumstances may change

How to Claim on Your Self Assessment Return

Enter your home office expenses under the Business expenses section of your SA103 (Self-Employment) form. Use the Use of home box. You do not need to attach receipts when filing, but you must hold them in case of a compliance check. If you use accounting software or EasyTax's expense tracker, categorise these costs consistently throughout the year to make filing straightforward.