Mixed-Use Property: Splitting Expenses Between Personal and Business Use

What Is a Mixed-Use Property?

A mixed-use property is one used for both personal and business purposes. For most sole traders and freelancers, this simply means working from home. If you use a room in your house as an office, or conduct any part of your business from your home address, you may be able to claim a portion of your household running costs against your self-employment income — reducing your tax bill legally and legitimately.

Which Expenses Can You Split?

HMRC allows you to apportion a range of household expenses based on the business use element. Eligible costs typically include:

• Mortgage interest or rent (but not capital repayments)
• Council tax
• Gas and electricity
• Broadband and phone bills (if not already claimed in full as a business line)
• Buildings and contents insurance
• Water rates
• General repairs and maintenance that apply to the whole property

You cannot claim the full cost of any of these — only the business-use proportion. You also cannot claim for room-specific improvements or mortgage capital repayments.

How to Calculate the Business-Use Proportion

HMRC expects your apportionment to be fair and reasonable. There is no single prescribed method, but the two most common approaches are:

• Room-based method: Divide the number of rooms used exclusively or primarily for business by the total number of rooms in the property. For example, if you use one room out of eight, you could claim one-eighth (12.5%) of eligible expenses.
• Time-based method: If a room is used for both personal and business purposes at different times, you apply an additional time adjustment. For instance, if you use your dining room as an office for eight hours a day, five days a week, you would calculate the proportion of hours it is used for business versus total hours in a week.

In practice, many sole traders combine both methods — first calculating the room fraction, then adjusting for hours of business use within that room. Keep a written record of how you arrived at your figures, as HMRC may ask you to justify them.

The HMRC Simplified Expenses Alternative

If the full calculation feels complicated, HMRC offers simplified expenses flat rates for home workers. As of 2026, these are:

• £10 per month if you work from home for 25 to 50 hours per month
• £18 per month for 51 to 100 hours per month
• £26 per month for more than 100 hours per month

These flat rates are straightforward and audit-proof, but they are often far lower than actual costs. If your real business-use proportion is significant, it is usually worth doing the detailed calculation instead.

Watch Out: Capital Gains Tax Implications

This is a critical point many freelancers miss. If you claim expenses based on a room being used exclusively for business, that portion of your home may lose its Private Residence Relief exemption when you sell the property, potentially triggering a Capital Gains Tax liability. To avoid this, HMRC generally accepts that a room used primarily but not exclusively for business preserves full CGT relief. Keep personal items in your home office and avoid treating any single room as a dedicated business-only space if CGT protection matters to you.

Record-Keeping Requirements

Whatever method you choose, keep the following records for at least five years after the relevant Self Assessment deadline:

• Copies of all utility bills, mortgage statements, and insurance documents
• A clear written calculation showing how you arrived at the business percentage
• Any floor plans or room counts you used
• A log of working hours if using a time-based method

Where to Enter This on Your Tax Return

On your Self Assessment SA103 (Self-Employment) form, enter your apportioned home expenses under Other allowable business expenses. Do not include them under rent or premises costs unless you are renting a genuinely separate business space. If you use HMRC's online return or accounting software, there will be a dedicated field for office costs or use-of-home expenses. Always keep your workings separate from what you enter, so you can reconstruct the figures if queried.