Claiming Business Use of Home: Flat Rate vs Actual
- Apr 2
- 3 min read
Working from home has been the norm for lots of business owners, especially since the Covid pandemic, yet many still miss out on claiming the costs they’re entitled to.
If you use part of your home for business (admin, client work, bookkeeping, calls, planning, etc.), you can usually claim a portion of your household costs as a business expense. The key is choosing the method that’s right for you: flat rate or actual costs.
In this blog we breakdown both options so you can decide what’s best (and keep your records tidy).
Option 1: Flat rate (simplified expenses)
HMRC offers a simplified method where you claim a fixed amount per month based on how many hours you work from home.
This is often called the flat rate method, and it can be a great choice if you want something quick and low-admin.
How the flat rate works
You can claim a set amount per month:
£10 per month if you work from home 25 to 50 hours a month
£18 per month if you work from home 51 to 100 hours a month
£26 per month if you work from home 101 hours or more a month
These amounts are designed to cover the extra household running costs of working from home (like heat, light, and power).
Pros of flat rate
Simple to calculate
Minimal record keeping
Easy to apply consistently each month
Things to watch
It may be lower than what you could claim using actual costs (especially if you have high bills)
It doesn’t cover everything, for example, it won’t help you claim a share of mortgage interest or rent (those are only relevant under actual costs)
Option 2: Actual costs (percentage of bills)
The actual costs method means you claim a proportion of your real household expenses, based on how much of your home is used for business.
This can be a good option if you:
Have higher household costs
Use a dedicated room as a home office
Work from home most days
What you can include
Depending on your situation, actual costs can include a share of:
Electricity and gas
Water
Council tax
Rent (if you rent)
Mortgage interest (not the full mortgage payment)
Broadband (business proportion)
Home insurance (business proportion)
How to calculate your percentage
There are a few reasonable ways to work this out, but a common approach is:
Work out how many rooms you have in your home (excluding bathrooms and hallways)
Identify how many rooms are used for business
Apply a time-based adjustment if the room is not used exclusively for business
For example:
You have 5 rooms (excluding bathroom/hallway)
You use 1 room for business
That room is used for business around 50% of the time
Your business-use percentage might be:
1/5 x 50
You could then claim 10% of eligible household bills.
Pros of actual costs
Can result in a higher claim than the flat rate
More tailored to your real costs
Things to watch
More admin and record keeping
You need to be consistent and able to justify your method
If a room is used exclusively for business, there can be implications when you sell your home (capital gains tax considerations). Many people avoid “exclusive use” by keeping some personal use of the space.
Flat rate vs actual: which should you choose?
There’s no one-size-fits-all answer, it depends on your bills, your working pattern, and how much admin you want.
A simple way to decide is:
Estimate what you’d claim under the flat rate (e.g., £10/£18/£26 per month)
Do a quick calculation of your actual costs using a reasonable percentage of bills
Compare the two and choose the method that gives you the best result with records you can comfortably maintain
What records should you keep?
Whichever method you choose, keep clear evidence:
Flat rate: a simple log or diary showing roughly how many hours you work from home each month
Actual costs: copies of household bills and your calculation showing how you worked out the business-use percentage
Need help choosing the right method?
If you’re not sure which approach fits your business best, it’s worth getting advice, especially if your home working pattern changes or you’re moving house.
If you’d like support reviewing your options (and making sure you’re claiming what you’re entitled to), get in touch with us today.
Comments