Use of home as office: Are you claiming?

Certainly since COVID, it has become increasingly common for employees to work from home either permanently or as part of flexible working for employees; however, the self-employed will often use their homes as offices too.

Costs of being at home

For the self-employed, income tax relief can be claimed based on actual costs of maintaining a room within one’s own house (e.g., mortgage interest, insurance, utility bills and council tax), apportioned on a just and reasonable basis to that space (e.g., square footage or number of rooms); alternatively, relief is available if 25 hours or more of work per month is carried out exclusively at home on core business activities. 25-50 hours allows a £10 per month fixed-rate allowance, 51 100 hours is £18 per month, with 101 hours or more attracting £26 a month.

For employees, prior to 6 April 2026, a much simpler administrative allowance of £6 per week was available to employees to cover those additional costs of working from home when required to do so and not reimbursed by the employer.
This criterion of being required to work from home was an important one the allowance was not available for office workers who worked from home occasionally; it was available for those who
had to work at home and which was stated as such in the employment contract. However, whilst this allowance has now been removed, employers can still reimburse actual costs incurred up to £6 per week tax-free.
One thing to bear in mind is the availability of capital gains tax (CGT) principal private residence (PPR) relief if the house is subsequently sold. Any part of the house used exclusively for business purposes (such as dedicated offices: see below) cannot qualify for the relief, but mixed-use bedrooms or kitchen-offices would do so.

Office in the back garden

The cost of the office itself is not deductible against income, and as a structure there are no capital allowances available thereon as plant and machinery; as the garden is residential grounds,
there is no structures and buildings allowance either. However, capital allowances may be claimed on fixtures and fittings within the office, and if there is a dedicated electricity metre or phone line to the office, those costs can be claimed.

Upon the eventual sale of the house, if the office is a permanent structure and is to be included in the sale, PPR relief for CGT purposes would not be available on the office as it was exclusively for business use.

If the structure is permanent (or if part of the house is permanently used for the business) and the house value increases as a result, it may be that that value is treated as a dividend and taxed
as such. A lease can be put in place between the company and the individual (as homeowner) with the rent as an allowable deduction and taxable on the homeowner.

If an individual’s limited company has paid for the office, it may be that a benefit-in-kind income tax charge could arise if there is even the smallest amount of private use. That charge is 20% of the value of the office when first made available.

Commuting

If someone’s home is used as an office, but there is also another permanent place of work (being somewhere where 40% of one’s time is spent over a period of more than 24 months), commuting
costs cannot be claimed from home office to that other workplace. Despite there being an office, it is still one’s home and so costs of commuting to a permanent place of work are not allowed.

Practical tip

Employees should ascertain whether their employer might reimburse £6 per week; self employed should consider ascertaining how much of their house is being used as an office and claim their actual costs unless the flat rate will be used.

Disclaimer: The information provided on AccountingFirms.co.uk is for general informational purposes only and should not be considered professional accounting, tax, or legal advice. Always consult a qualified accountant or tax adviser for advice tailored to your individual circumstances.