Who can claim, and why it pays to check first

If you regularly work from home, the chances are you are footing a bill that your employer or your business would otherwise cover. Extra heating, a bit more electricity, perhaps a faster broadband package to cope with video calls — it all adds up quietly over the year. The good news is that the tax system recognises this, and there are two routes to reclaiming some of it: a flat rate allowance or a proportion of your actual household costs.

Before you dive in, it is worth being clear about which set of rules applies to you. Employees working from home under an arrangement with their employer are in a different position from someone who is self-employed and runs a business from a spare room. The eligibility tests, the amounts you can claim, and the evidence you need to keep are not identical. Getting this wrong is one of the most common reasons a claim gets rejected or, worse, has to be repaid later with interest.

The flat rate allowance for employees

For employees, the simplest option is the flat rate deduction for homeworking. If your employer requires you to work from home — and this is important — you can claim a fixed amount per week to cover the additional household costs. The exact figure is set by HMRC and reviewed periodically, so check the current rate on the government's own guidance before you calculate anything.

The word required is doing a lot of work here. Choosing to work from home because it suits you, or because your office is a long commute, does not qualify. Your employer generally needs to have asked you to work from home, and you should be able to point to that arrangement if asked. Many employers will pay the allowance directly through payroll and simply report it correctly; if yours does not, you can usually claim the relief through your tax code or a self assessment return.

One useful quirk: if your employer pays you the flat rate directly, that payment is normally tax-free. If they pay you more than the published rate, the excess becomes taxable, so keep an eye on your payslip.

Claiming a proportion of your household bills

Self-employed people, and employees who prefer a more precise approach, can instead work out the actual additional costs of working from home and claim a fair share. This is sometimes called the proportional method. You look at your household bills — gas, electricity, water, broadband, council tax, and possibly rent or mortgage interest — and determine what percentage relates to business use.

The most common way to do this is by time. If you work from a home office for eight hours a day, five days a week, that is roughly 40 hours out of a 168-hour week. Many people use a simple room-based calculation instead: count the rooms in your home and the number of hours the workspace is used for business. The result is a defensible percentage you can apply to the relevant bills.

• Broadband and phone: claim the business share of the line rental and calls. If the connection is also used privately, apportion it honestly.
• Gas and electricity: the extra heating and lighting used during working hours.
• Water: generally a smaller amount, but not negligible if your work involves cleaning or laundry.
• Council tax and rent: possible for self-employed people, but the calculation needs care and consistency.
• Mortgage interest: rarely straightforward for a home office — take advice before including it.

What you cannot claim

There are firm boundaries here, and crossing them is where people get into trouble. You cannot claim for costs that would have arisen whether you worked from home or not. Normal household expenses that you would pay anyway — the standard cost of heating a living room in the evening, for example — are not additional business costs.

You also cannot claim for the full cost of a room simply because you work in it. If the space is used for anything personal, the business share must reflect that. Turning a bedroom into a dedicated office does not mean you can claim the whole council tax bill unless the room is genuinely used only for work, and even then the proportion is usually modest.

Finally, do not double up. If your employer reimburses you for broadband or pays a homeworking allowance, you cannot claim the same expense again on your tax return. That is a quick way to attract unwanted attention.

Records and evidence worth keeping

Whichever method you choose, the paperwork matters. Keep copies of the bills you are apportioning, a note of how you calculated your business percentage, and any correspondence confirming your homeworking arrangement. A short written record — even a spreadsheet row explaining "40 hours per week, 20 per cent of gas bill" — is far better than trying to reconstruct it months later.

If you use the flat rate, the record-keeping is lighter, but you should still be able to show that you were required to work from home. If you are self-employed, retain receipts and calculations for at least six years after the filing deadline, as that is how long records normally need to be kept.

A word on getting it right

The rules are not designed to trip you up; they exist so that genuine additional costs are recognised without turning the tax system into a subsidy for ordinary household living. Used sensibly, both the flat rate and the proportional method can put a meaningful amount back in your pocket over the year.

If your circumstances are unusual — a mixture of employed and self-employed work, a large dedicated workspace, or costs shared with someone else — it is worth spending an hour with an accountant. The fee is often less than the tax you would otherwise miss, and it saves a lot of second-guessing.