{"id":928,"date":"2025-07-30T06:45:25","date_gmt":"2025-07-30T06:45:25","guid":{"rendered":"https:\/\/www.luzenta.com\/blog\/?p=928"},"modified":"2025-07-30T06:45:25","modified_gmt":"2025-07-30T06:45:25","slug":"working-from-home-as-a-sole-trader-heres-what-you-can-claim","status":"publish","type":"post","link":"https:\/\/www.luzenta.com\/blog\/working-from-home-as-a-sole-trader-heres-what-you-can-claim\/","title":{"rendered":"Working from Home as a Sole Trader? Here\u2019s What You Can Claim"},"content":{"rendered":"

Operating as a sole trader from home is no longer seen as unconventional. For many people, it offers a practical and cost-efficient way to start and grow a business. According to recent estimates, nearly 2.9 million UK businesses are now run from their owners\u2019 homes. These businesses contribute more than \u00a3300 billion to the national economy and account for a large share of new business start-ups each year.<\/span><\/p>\n

For many sole traders, setting up at home removes one of the most significant overheads: the cost of renting or buying business premises. This provides flexibility and reduces financial risk, particularly in the early stages. But the advantages extend beyond savings on rent. Sole traders working from home are entitled to claim a variety of home-related costs as allowable expenses, helping to reduce their taxable income and, in turn, the amount of tax they owe.<\/span><\/p>\n

The Basics of Allowable Expenses<\/b><\/p>\n

Understanding allowable expenses is crucial for any self-employed person. These are legitimate costs that HM Revenue & Customs permits you to deduct from your business income. Once allowable expenses are subtracted, you are left with your taxable profit, which forms the basis of your tax calculation.<\/span><\/p>\n

The core requirement for an expense to be allowable is that it must be incurred wholly and exclusively for the purpose of running your business. Personal expenses are excluded. If something is used for both personal and business purposes, you must determine the business-use proportion and claim only that. This principle applies widely in home-based businesses, where resources like heating, electricity, broadband, and even furniture are shared between personal life and work.<\/span><\/p>\n

This applies even if you are not entirely home-based. For example, tradespeople who spend most of their time on the road but handle their admin, invoicing, or customer communication from home can still claim a proportion of their home expenses.<\/span><\/p>\n

The \u00a31,000 Trading Allowance Limitation<\/b><\/p>\n

There is an alternative to claiming actual expenses: the \u00a31,000 trading allowance. This allows sole traders to earn up to \u00a31,000 in business income tax-free without having to declare expenses. However, if you choose to claim this allowance, you cannot also deduct any business expenses from your income. This makes it more suitable for those with very low costs or occasional side income. For those with regular or significant business expenses, claiming allowable costs often results in a better tax outcome.<\/span><\/p>\n

Key Home-Based Expenses You Can Claim<\/b><\/p>\n

When running your business from home, there are many household-related costs that you can claim, provided they meet HMRC\u2019s criteria. These are not limited to utilities and telecoms, though those are common. This section focuses on property and maintenance-related expenses, which often represent some of the larger and more consistent costs you\u2019ll encounter.<\/span><\/p>\n

Mortgage Interest Payments<\/b><\/p>\n

If you are paying off a mortgage, you cannot claim the full repayment amount. Mortgage repayments usually consist of both capital and interest. Only the interest portion is potentially claimable. You can only claim a proportion of the interest that relates to the business use of your home.<\/span><\/p>\n

To calculate this, you first determine how many rooms are in your home and how many of those are used for your business. Then, you factor in how many hours per day or week those rooms are used for work. This approach allows you to calculate a reasonable and justifiable percentage of the mortgage interest you can claim as an allowable expense.<\/span><\/p>\n

You must ensure that you are only claiming interest costs, as mortgage capital repayments are never allowable under HMRC rules.<\/span><\/p>\n

Rent<\/b><\/p>\n

If you rent your home rather than owning it, a portion of your rent may also be claimed as an allowable expense. The process of working out how much to claim is similar to that for mortgage interest. You base the claim on how much of your home is used for business purposes and how often.<\/span><\/p>\n

For example, if you rent a four-room home and use one of those rooms exclusively for business for half of the week, you would calculate a suitable proportion of your rent accordingly. This amount can be deducted from your business income when calculating your taxable profit.<\/span><\/p>\n

Council Tax<\/b><\/p>\n

Council Tax is another recurring cost that applies to most residential homes in the UK. If you use part of your home for your business, you may be able to claim a portion of this expense. As with rent and mortgage interest, you need to work out how much of the property and how much time is dedicated to business activities.<\/span><\/p>\n

Your calculation might look something like this: your annual Council Tax bill is \u00a31,200. You work from one room out of a total of five, and that room is used solely for business five days a week. You might calculate the claimable proportion as one-fifth of \u00a31,200, adjusted to reflect the time it\u2019s used for business.<\/span><\/p>\n

Business Rates<\/b><\/p>\n

Most people working from home do not pay business rates. However, in certain circumstances, a portion of your home may be classified as business premises. This might apply if you have made significant modifications to an area of your property to run your business, such as converting your garage into a customer-facing salon or training studio.<\/span><\/p>\n

If your local authority determines that business rates apply, you may be eligible to claim the full amount paid as a business expense. It\u2019s essential to check this with your council, especially before making any structural changes to your property.<\/span><\/p>\n

Maintenance and Repairs for Business Areas<\/b><\/p>\n

Maintenance work is often necessary to keep your home safe and functional. If repairs or maintenance relate directly to the part of your home used for business, you may be able to claim all or part of the cost.<\/span><\/p>\n

For example, repainting or fixing a window in your home office would generally be a valid business expense. Even general repairs that affect the entire home, such as a new boiler installation or roof repairs, can be claimed in part if your business space benefits from them. Again, the proportion should be calculated based on how much of the home is used for the business.<\/span><\/p>\n

It\u2019s worth noting that cosmetic improvements or renovations aimed at increasing your home\u2019s resale value are unlikely to qualify as allowable expenses, unless there is a direct and measurable business use involved.<\/span><\/p>\n

Professional Cleaning<\/b><\/p>\n

If you hire professional cleaners to clean your home, and that cleaning service covers your business workspace, you may be able to claim a portion of the cost. This is only applicable where the cleaning is necessary for the running of the business or maintaining a professional environment for clients.<\/span><\/p>\n

Where cleaners are employed solely to clean the business space, the entire cost may be claimed. If the cleaning covers the whole house, a proportionate share must be calculated in line with the space and time used for business activities.<\/span><\/p>\n

Major Repairs<\/b><\/p>\n

Large-scale repairs or improvements, such as replacing a roof or addressing structural issues, can be partially claimed as allowable expenses if the business area benefits from them. These types of costs are usually shared across the property, so you\u2019ll need to apply a reasonable method to calculate how much is related to your business use.<\/span><\/p>\n

For example, if you run your business from a home office and your roof is repaired, the business-use portion of your roof-related costs can be calculated and included in your expense claim.<\/span><\/p>\n

These expenses are subject to scrutiny, so it\u2019s important to keep all records, including invoices and calculations, and to apply the same method consistently year after year.<\/span><\/p>\n

Capital Gains Tax Consideration<\/b><\/p>\n

One important caveat to keep in mind when claiming home expenses is how your claims might affect Capital Gains Tax when you eventually sell your home. If you declare a specific room as being used exclusively for business, HMRC may later consider that room to be outside the private residence exemption. This could result in part of the profit from selling your home becoming liable for Capital Gains Tax.<\/span><\/p>\n

To avoid this, many sole traders opt to demonstrate that the room is used for both business and personal activities. By doing so, they can claim a proportion of costs while still preserving full Capital Gains Tax relief on the property.<\/span><\/p>\n

Continuing to Maximise Allowable Expenses from Home<\/b><\/p>\n

We examined how sole traders running a business from home can claim tax relief on housing-related expenses such as mortgage interest, rent, Council Tax, repairs, and maintenance. These are often among the most significant costs, especially when a dedicated room or space is used regularly for business purposes.<\/span><\/p>\n

However, the list of allowable expenses doesn\u2019t stop there. Home-based businesses rely heavily on essential utilities, communication tools, and equipment. These can all be partially or wholly deductible, depending on how they are used in your business.<\/span><\/p>\n

We explored these areas in depth, looking at how to approach mixed-use expenses, how to calculate the business-use portion, and when it might be simpler to opt for HMRC\u2019s flat-rate method instead.<\/span><\/p>\n

Claiming Utility Bills When Working from Home<\/b><\/p>\n

Operating a business from home increases your use of basic utilities. Even if the increase is modest, it is usually enough to justify claiming back part of those costs, especially if you work from home full-time.<\/span><\/p>\n

Electricity<\/b><\/p>\n

Electricity is often one of the higher household bills and can be claimed in part when used to power a home office, studio, or workspace. This includes lighting, heating, charging laptops, powering equipment, and running appliances directly linked to your business activities.<\/span><\/p>\n

To calculate what you can claim, you need to determine a reasonable method based on the number of rooms in your home and the number of hours the space is used for business.<\/span><\/p>\n

For example, if your electricity bill is \u00a31,200 annually, and you work from one room in a six-room home, using it 50 percent of the time for business, the calculation would be:<\/span>
\n<\/span> \u00a31,200 divided by 6 equals \u00a3200 per room.<\/span>
\n<\/span> \u00a3200 multiplied by 50 percent (business use) equals \u00a3100.<\/span><\/p>\n

That \u00a3100 would be the claimable business-use portion for the year.<\/span><\/p>\n

Gas<\/b><\/p>\n

Gas is another utility that you may use more during working hours, particularly for heating in colder months. Similar to electricity, the portion that can be claimed depends on the rooms used and the time spent working in them.<\/span><\/p>\n

This is often calculated annually, but some sole traders may calculate separate proportions for summer and winter if usage varies significantly. The key is to use a consistent and justifiable method and retain records in case HMRC requests evidence in future.<\/span><\/p>\n

Water Rates<\/b><\/p>\n

Water bills are slightly different. Many businesses do not significantly increase household water usage unless water is essential to their trade. For example, if you run a home-based cleaning service, pet grooming business, or beauty treatment room, you\u2019re more likely to use extra water than someone working on a computer.<\/span><\/p>\n

If your business does require increased water use, you may claim an appropriate portion of the bill. Otherwise, claims should reflect minimal usage, or it may be more appropriate to exclude water entirely if it\u2019s not materially impacted by your business operations.<\/span><\/p>\n

Dealing with Communication Costs<\/b><\/p>\n

Communication tools are essential to any modern business. They are how you communicate with customers, suppliers, and partners. When running your business from home, your internet connection, mobile phone, and potentially a landline are part of your operating infrastructure.<\/span><\/p>\n

Because these are usually shared with personal use, the portion you can claim must reflect business use only.<\/span><\/p>\n

Broadband and Internet<\/b><\/p>\n

Broadband is one of the most common home expenses claimed by sole traders. If you use your internet connection for business tasks like emailing, running a website, conducting video calls, or using cloud-based software, then a proportion of your broadband bill can be claimed.<\/span><\/p>\n

The claimable amount depends on your usage pattern. If you use broadband equally for business and personal reasons, you could justify a 50 percent claim. If it\u2019s used almost entirely for business during working hours, you may be able to claim more.<\/span><\/p>\n

Keep in mind that you\u2019ll need to document your method for calculating the percentage, especially if you\u2019re audited.<\/span><\/p>\n

Landline<\/b><\/p>\n

If you use a landline phone for your business, you may claim the portion of your phone bill that covers business calls. If you\u2019ve installed a second dedicated line specifically for your business, then you can usually claim the full cost.<\/span><\/p>\n

If you use a single line for both business and personal calls, keep a record of how much time or cost is associated with business usage. Itemised bills can help you calculate a reasonable percentage.<\/span><\/p>\n

As with other mixed-use claims, consistency is key. A clearly documented method, applied the same way each year, is likely to stand up to scrutiny.<\/span><\/p>\n

Mobile Phone<\/b><\/p>\n

Most sole traders use a mobile phone for both business and personal purposes. To determine how much of the cost can be claimed, assess what proportion of your calls, texts, and data are for business.<\/span><\/p>\n

Suppose your mobile phone bill is \u00a350 per month, and you estimate that 60 percent of the calls and usage relate to your business. You could reasonably claim \u00a330 per month as an allowable expense.<\/span><\/p>\n

If you have a separate phone used exclusively for business, you may be able to claim the full cost. Retain purchase receipts, contracts, and itemised bills to support your claim if required.<\/span><\/p>\n

Equipment, Office Furniture, and Stationery<\/b><\/p>\n

Many home-based sole traders invest in tools, furniture, and technology to run their business efficiently. These purchases are often eligible as allowable expenses, but how they are claimed depends on your accounting method.<\/span><\/p>\n

Cash Basis vs Traditional Accounting<\/b><\/p>\n

If you use cash basis accounting, where income and expenses are recorded when money changes hands, then items like computers, printers, desks, and office chairs can usually be claimed in full as business expenses.<\/span><\/p>\n

If you use traditional accounting, which records transactions based on invoice dates regardless of when payment is made, such purchases are considered capital assets. In this case, you would claim the cost gradually over time using capital allowances.<\/span><\/p>\n

Office furniture and business supplies that are used solely for your business can also be claimed in full under cash basis accounting. This includes filing cabinets, shelving units, business-specific lighting, and stationery such as paper, pens, and envelopes.<\/span><\/p>\n

Make sure any item you claim is genuinely used for your business. Shared items must be apportioned, and items used primarily for personal purposes cannot be claimed at all.<\/span><\/p>\n

The Option of Using Simplified Expenses<\/b><\/p>\n

For sole traders who prefer not to spend time calculating individual bills and usage patterns, HMRC offers an alternative in the form of simplified expenses. This is a flat-rate method based on how many hours you work from home each month.<\/span><\/p>\n

It is available to those who work at least 25 hours a month from home and wish to simplify their tax return.<\/span><\/p>\n

Flat-Rate Calculation<\/b><\/p>\n

If you work:<\/span><\/p>\n