Use of Home as Office 2026/27: A Guide to Expenses for Employees & Self-Employed

As working patterns evolve, understanding the tax implications of using your home as an office is essential. For the 2026/27 tax year, there is a significant divergence in the rules for employees and the self-employed. A major legislative change removes the ability for employees to claim tax relief directly from HMRC for homeworking costs, shifting the focus entirely onto employer reimbursements. The rules for self-employed individuals, however, remain unchanged.

For Employees: The Abolition of Homeworking Tax Relief

From 6 April 2026, the tax relief that allowed employees to claim a deduction from their income for additional household expenses incurred while working from home has been abolished. This change applies to employees who are required to work from home but are not reimbursed by their employer.

This measure was introduced to address high levels of non-compliance, where a significant number of claims were found to be ineligible. The relief, which was based on section 336 of the Income Tax (Earnings and Pensions) Act 2003, allowed employees to claim for costs incurred “wholly, exclusively and necessarily” in performing their duties.

Key points of the change:

• Employees can no longer claim the £6 per week flat rate (or actual costs) from HMRC.
• The change affects an estimated 300,000 individuals, who will see a resulting tax increase.
• The legislative change involves inserting a new section (s360B) into ITEPA 2003 to specifically disallow these deductions.

Employer Reimbursements Remain Tax-Free

While employees can no longer make a direct claim to HMRC, the ability for employers to reimburse employees for homeworking expenses without creating a tax liability remains unaffected.

Under section 316 of ITEPA 2003, an employer can provide accommodation, supplies, or services for an employee to use while performing their duties, tax-free, provided two conditions are met:.

1. Any private use of the supplies or services is not significant.
2. The sole purpose of providing them is to enable the employee to perform their duties.

This means employers can continue to pay employees tax-free amounts to cover the additional household costs of working from home.

For the Self-Employed: Claiming Home Office Expenses

The rules for sole traders and partners using their home as an office are not affected by the changes for employees. You can continue to deduct a proportion of your household running costs from your taxable profits. There are two methods to calculate this deduction.

1. The Actual Costs Method

This method involves calculating the business proportion of your actual household expenses. You must apportion costs on a just and reasonable basis, considering factors like the area of your home used for business, the time it is used, and actual consumption.

HMRC provides examples of costs that can be apportioned:.

• Fixed Costs: Council Tax, mortgage interest, insurance.
• Running Costs: Electricity, gas, water.
• Connectivity: Business proportion of telephone and broadband costs.

A common method is to calculate the proportion of the home used for business (e.g., one room out of ten is 10%) and then adjust for the amount of time that space is used for business versus private use.

2. The Simplified Expenses Method (Flat Rate)

As an alternative to calculating actual costs, unincorporated businesses can use a simplified flat-rate deduction. This is based on the number of hours you work from home each month.

The flat rates cover the business use of heat, light, and power.

Important: Using this flat rate for running costs does not stop you from claiming the business proportion of fixed costs like council tax and mortgage interest, or direct costs like business phone calls and broadband.

A Note on Capital Gains Tax (CGT)

When you sell your main home, you are usually entitled to Private Residence Relief (PRR), meaning no CGT is due. However, if part of your home has been used exclusively for business purposes throughout your ownership, that portion may not qualify for PRR. This is a crucial consideration if you have a dedicated office that has no other domestic use. Using a room for both business and personal activities (e.g., an office that is also a guest room) generally preserves the full relief.

For detailed guidance on apportioning expenses for the self-employed, refer to HMRC’s Business Income Manual at BIM47815. For the previous rules relating to employees, you may wish to review HMRC’s Employment Income Manual at EIM32760, noting the legislative changes from 6 April 2026.