UK accountants working from home can claim home-office costs in different ways depending on their structure. Sole traders use HMRC's simplified flat rate (based on hours worked) or apportion actual costs. Limited company directors can claim a small fixed weekly allowance under HMRC's "use of home" guidance, or set up a written rental agreement between themselves and the company for a market-rate share of household costs. Each method has trade-offs, and a fully exclusive business room can create capital gains tax exposure on sale of the home.
Sole traders: two main methods
Method 1 — HMRC simplified expenses
HMRC publishes flat monthly rates for using your home for business based on the number of hours per month you work from home. These flat rates cover light, heat, and similar running costs but not phone, internet, council tax, mortgage interest, or rent. Use this method if your working hours from home are stable and you want a low-admin claim. Check current GOV.UK rates each tax year.
Method 2 — Apportionment of actual costs
Apportion actual household costs between business and private use. The standard formula is:
- Identify total annual costs (mortgage interest or rent, council tax, utilities, insurance, repairs)
- Apportion by area: rooms used for business as a fraction of total rooms (excluding kitchens and bathrooms in many calculations)
- Apportion by time: hours of business use as a fraction of total hours the room is used
- Apply both fractions to relevant costs
Telephone and broadband are claimed by reference to actual business use percentage, separately from the room calculation.
Limited company directors
Method 1 — HMRC's nominal weekly allowance
HMRC allows a small fixed weekly amount for "use of home" by directors, payable by the company tax-free, without needing detailed records. The amount is set by HMRC and reviewed periodically; check the current rate on GOV.UK. This is by far the simplest option but typically a small claim.
Method 2 — Director's rental agreement
The director and the company enter into a written rental agreement covering use of part of the home as office space. The rent should be set at a fair market rate based on apportioned household costs (similar to the sole-trader actual costs method) plus a reasonable margin. The company pays the rent (tax deductible at corporation tax rate); the director declares it as rental income on their personal tax return, but offsets the apportioned costs against it, often netting to little or no taxable income.
This method can produce a much larger deduction than the nominal weekly allowance but requires:
- A written commercial agreement
- Apportioned cost calculations
- Personal disclosure on the SA tax return as land and property income
- Care over the wider tax position (see CGT below)
Phone and broadband
If the company contracts directly for the broadband or phone (in the company name), the cost is fully deductible and the personal benefit-in-kind is usually nil provided private use is not significant. If the contract is in the director's personal name, only the business proportion is reimbursable tax-free.
Equipment and furniture
The company can buy office equipment (desk, chair, monitors, laptop) used wholly and mainly for business with no benefit-in-kind issue and full corporation tax deduction (often via the Annual Investment Allowance). Sole traders deduct similarly via capital allowances.
Capital gains tax warning
If a room in your home is used exclusively for business, the relevant proportion of any future gain on sale of the home may not qualify for Private Residence Relief, creating a capital gains tax charge. The simple fix is to use the room for some non-trivial private purpose as well (e.g. occasional family use), which preserves PRR for the whole property. Many accountants take this approach and document it as part of their home office setup.
Business rates
Most home-based accountants do not become liable for business rates. However, if you adapt part of your home so it is no longer suitable for domestic use (e.g. a fully-converted external office with a separate entrance), the Valuation Office may rate that part separately. For a desk-in-a-spare-room setup, this is generally not a concern.
Mortgages and tenancy
- If you are a tenant, check your tenancy agreement; some prohibit business use without consent
- If you have a mortgage, some lenders ask to be notified of business use; many do not object provided no structural changes are made and no business signage appears
- Leasehold flats may have lease covenants restricting business use
Whatever method you use, document your calculation and the basis for it (rooms used, hours, costs apportioned). HMRC's main concern in a check is consistency and reasonableness, not the absolute amount.
Practical worked-example structure
For a sole trader using actual costs:
- Annual home running costs: e.g. mortgage interest, council tax, utilities, insurance, repairs, totalling £X
- Number of rooms: e.g. 5 (excluding kitchen and bathroom)
- Office uses 1 room = 20%
- Office is used for business 50 hours per week, total room use 70 hours = 71% business time
- Business proportion: 20% × 71% = 14.2%
- Claimable deduction: £X × 14.2%
- Plus business proportion of phone and broadband, separately calculated
Key Takeaways
- Sole traders can use HMRC simplified expenses (flat rate by hours) or apportion actual costs
- Limited company directors can use HMRC's small weekly allowance or set up a director's rental agreement for a larger deduction
- Phone and broadband are claimed separately by business-use proportion
- Equipment and furniture used for business are usually fully deductible
- Avoid using a room exclusively for business to preserve full Private Residence Relief on sale of the home
- Check tenancy and mortgage agreements; notify your insurer of business use
Frequently asked questions
Can I claim mortgage interest as a sole trader?
You can claim a business proportion of mortgage interest (not capital repayment) as part of the actual-costs method, applied to a reasonable apportionment of business use.
Can I claim council tax?
You can claim a business proportion of council tax under the actual-costs method. The simplified-expenses method does not include council tax.
How much is the directors' weekly home allowance?
HMRC publishes a small flat amount (currently a few pounds per week). Check the latest rate on GOV.UK.
Will I lose Private Residence Relief if I claim home-office expenses?
Not unless a part of the home is used exclusively for business. Mixed use preserves PRR. The HMRC simplified-expenses route does not by itself create exclusive use.
Should I set up a director's rental agreement?
It can significantly improve the deduction over the nominal weekly allowance for a director with substantial home use. It requires a written agreement, calculations and a personal SA disclosure: take advice on whether the additional admin is worth it for your circumstances.