The Homeworker’s Three Doors: How Employees, Sole Traders and Directors Claim Home Office Costs in 2026/27

Working from home can produce a genuine tax deduction, but there is no single homeworking tax break that fits everyone. In 2026/27, an employee, a sole trader and a limited company director may all be able to claim something for home office costs, yet the route to the claim depends on employment status, the arrangement in place and the evidence available. The common principle is simple: tax relief should follow a real cost, and the same cost should not be claimed twice.

The employee route: £6 a week, but relief rather than a payment

An employee who works from home under an arrangement with their employer can usually claim tax relief on a flat rate of £6 a week, or £26 a month. That is about £312 a year. The important point is that this is tax relief, not a cash allowance. At the basic rate, £312 of relief is worth £62.40; at the higher rate, £124.80; at the additional rate, £140.40.

If the employer pays the employee £6 a week tax-free for homeworking, the employee should not also claim the same £6 in tax relief. The employer may reimburse the flat rate without a detailed expense claim where the homeworking arrangement is in place. If the employer pays more than £6 a week, the excess is normally taxable unless it reimburses actual additional household costs that the employee has incurred because of working from home.

Employees sometimes assume they can claim a share of rent, mortgage interest, council tax or broadband as a flat deduction. That is not how the employee flat rate works. It is a simplified relief for additional household running costs. Employees who have actually incurred higher costs can claim a proportionate amount, but they need evidence and the claim must relate to business use rather than ordinary domestic bills. A claim is usually made through a P87 form where expenses are under £2,500, or through Self Assessment where a return is already required.

Hybrid workers should be careful not to claim a full year by default. If the homeworking arrangement is occasional, the claim should reflect the period or pattern of home working. The £6 weekly figure is convenient, but convenience is not a substitute for a defensible basis.

The sole trader route: simplified expenses or actual costs

For an unincorporated business, there are two main ways to claim home office costs. The first is simplified expenses. For 2026/27, the monthly flat rates are based on the number of hours worked from home each month: £10 for 25 to 50 hours, £18 for 51 to 100 hours, and £26 for 101 hours or more. The hours should be genuine business hours, and a monthly record is sensible because the rate can change from month to month.

Simplified expenses are popular because they avoid apportioning every household bill. But they are not a free-standing bonus. Once simplified expenses are used for home office costs, the business cannot also claim actual household running costs for the same period. The flat rate is intended to cover the additional home costs of running the business, not mortgage capital repayments, major improvements or private living costs.

The second route is a formal use-of-home claim based on actual costs. This involves taking a reasonable proportion of household running costs, such as heat, light, broadband and, where appropriate, a fair share of rent or mortgage interest. The proportion should reflect both the space used and the time it is used for business. A common approach is to take the number of rooms used for business as a fraction of the total rooms, then adjust for the hours of business use. The calculation should be written down and kept with the supporting bills.

That route can produce a larger deduction than simplified expenses, but it is also more likely to be examined. The claim must exclude the private share, capital repayments and costs that would have been incurred anyway without the business. If the home is rented, the tenancy should be checked before any claim is made. If the property is jointly owned or jointly rented, the claim should reflect the business use and the ownership position.

The director route: company payment, not a personal free-for-all

A limited company director is often also an employee of the company. Where the director works from home under a homeworking arrangement, the company can usually pay the same £6 a week tax-free homeworking allowance, and the company can deduct the payment as a business expense. The director should not then claim the same £6 personally.

The company can also reimburse actual additional household costs that the director incurs because of home working, provided the amount is evidenced and does not include a private element. A flat payment above £6 a week without a basis is more vulnerable. The company cannot simply label an arbitrary sum as a tax-free home office allowance and assume it will survive scrutiny.

A more formal arrangement, such as the company paying the director rent for the use of part of the home, needs proper documentation. There should be a licence or agreement, a market-based rent, and advice on the tax and National Insurance consequences. The director may have taxable income, and the company’s deduction depends on the payment being wholly and exclusively for the business. This is not an area for a verbal arrangement and a round-number payment.

The traps HMRC is likely to look for

The first trap is double claiming. An employee cannot claim tax relief on £6 a week and receive the same £6 tax-free from the employer. A sole trader cannot use simplified expenses and also claim actual household bills for the same period. A director cannot have the company reimburse actual costs and then claim the flat rate personally.

The second trap is claiming the whole household bill. Home office claims should be limited to the business proportion of additional costs. Mortgage capital repayments, private broadband use and ordinary domestic expenses are not business deductions simply because some work happens at home.

The third trap is poor record keeping. Employees claiming the flat rate need to be able to explain the homeworking arrangement. Anyone claiming actual costs needs bills, a clear apportionment calculation and evidence of business use. Sole traders using simplified expenses should keep a record of monthly homeworking hours. For Self Assessment, records should generally be retained for at least five years after the 31 January filing deadline.

A practical way to approach a 2026/27 claim

Start by identifying the correct route: employee, sole trader or director. Then choose one method for the same costs and stick to it. Check whether an employer or company has already reimbursed the expense. Write down the basis of the claim, keep the supporting records, and review the position if working patterns change during the year.

A modest home office claim that can be explained is safer than a larger claim that cannot be defended. In 2026/27, the risk is less about the size of the deduction and more about whether the story behind it holds together. At Taxxa, the plain-English rule is straightforward: claim what the business genuinely bears, keep the private share out, and never claim the same cost twice.