How Landlords Claim Home Office Costs: Actual Costs, Not a Flat Rate

Yes, you can claim home office costs against your rental profit, but not at £10, £18 or £26 a month. Those flat rates belong to traders, and letting property is not a trade. What you claim instead is a fair and reasonable share of your actual household running costs, which in the worked example below comes to £205.71 a year.

The distinction matters more than a small deduction usually would, because the mistake runs in both directions. Claiming a flat rate you are not entitled to is an error that has to be unwound across every year you claimed it. Claiming the larger actual-cost figure on the wrong footing is the more expensive one: a home office described as used exclusively for the business restricts Private Residence Relief on your own home, and on a £270,000 gain that costs £3,908.57.

Landlords cannot use the £10, £18 and £26 flat rates

The flat rates are real, and they are not yours. They sit in ITTOIA 2005 s.94H, which opens by saying it applies "if, in calculating the profits of a trade of a person for a period, a deduction would otherwise be allowable" for the use of that person's home. Your rental profit is not the profit of a trade. It is property income, computed under a separate part of the same Act.

The property business rules do borrow from the trading rules, but selectively, and the borrowing is done through a list. Section 272 sets out exactly which trading provisions apply to a property business, and for the simplified fixed-rate chapter the list contains two entries: the exclusion for firms with a corporate partner, and "sections 94D to 94G, expenditure on vehicles". The cash basis version of the same table reads identically. So the fixed mileage rates do reach you, which is why you can claim 55p a mile for the first 10,000 miles of property trips, and the use of home rate sitting immediately after them in the same chapter does not.

The same answer comes back from two other directions. Gov.uk's simplified expenses guidance states that the scheme "can be used by sole traders, business partnerships that have no companies as partners" and never mentions landlords or property businesses anywhere in its eligibility wording. And HMRC's landlord manual, PIM2100, is the page that deals with a landlord's own home: it offers actual costs and nothing else, because no flat rate reaches a property business.

Where the £6 a week and the £26 a month actually come from

Both figures are genuine, and neither is a landlord's. The £6 a week, £312 a year, is the guideline rate an employer may pay an employee tax free for homeworking, and HMRC states it as "£6 per week or £26 per month for monthly paid employees" from 6 April 2020. It requires an employer, so it reaches you only if your portfolio is in a company and you are its director. The £10, £18 and £26 monthly bands are the trader flat rate, banded by hours worked at home: 25 or more, 51 or more, 101 or more.

The £26 appears in both, which is probably how the confusion started. A £26 a month claim set against property income has taken a trader's rule or an employee's rule and pointed it at the one kind of income neither rule reaches. If you have been claiming on that basis, the correction is a straightforward amendment rather than a disclosure, and the actual-cost figure is often larger anyway, as the worked example shows.

What you can claim: a fair share of your actual household costs

A defensible share of your electricity, gas, water, broadband, insurance and council tax. PIM2100 allows it at two levels: the extra lighting and heating that running the business actually costs you, and, where part of your home is used exclusively for the business, a proportion of the fixed costs referable to that part. Which level you take sets both the size of your claim and what it costs you when you sell.

The first level is the extra cost of running the business from home. In HMRC's words, "where a landlord genuinely runs the property business from home they may claim the extra business costs that they incur, such as the cost of extra lighting and heating". That is the additional consumption, and nobody argues about it.

The second level is a share of what your home costs you anyway. HMRC's condition is that "a specific part" of the home is "used exclusively for running the property business for a significant amount of time, whether continuously or at particular times". Where that is met, "a proportion of all fixed expenses referable to that room may be deducted", and HMRC's own examples of those expenses are the rent you pay your own landlord, repairs, property insurance, lighting and heating. Note the second half of that condition: use at particular times qualifies, which is what lets a fraction be applied to all six of the fixed costs rather than to extra light and heat alone. This is the level worth having, and it is also the one that carries the capital gains problem covered further down.

On method, HMRC is deliberately open: "It is impossible to lay down hard and fast rules because circumstances vary enormously. The aim is for the property business deductions to reflect the commercial use of the property in a fair and reasonable way." There is no prescribed formula. There is a standard you have to meet, and a note explaining how you met it.

The gateway test behind all of it is ITTOIA 2005 s.34, the wholly and exclusively rule, which blocks a cost that has a private purpose unless you can identify a definite business part of it. That is precisely what an apportionment does, and it is why the arithmetic has to be written down rather than estimated in your head.

Costs that belong in the apportionment pot: electricity, gas, water, broadband, home insurance, council tax, and rent if you are a tenant in your own home. Costs that do not: capital repayments on your mortgage, and interest on the loan secured on the home you live in. Home loan interest is not a cost of your lettings business, and for an individual landlord residential finance costs give a 20% tax reducer rather than a deduction anyway. Anything used wholly for the business, such as accounting software, postage, printer ink or a separate phone line, is claimed in full and kept out of the pot entirely.

What about a garden office or converted outbuilding?

Treat the building and the running of it as two separate questions. Putting up a garden room, or converting a garage into an office, is capital expenditure on your own home, so none of the build cost is deductible from your rental profit. The running costs are a different matter: the power, the heating and the share of your broadband that serves it go into the apportionment on exactly the same basis as a spare bedroom would.

Be careful with the fraction, though. A purpose-built garden office is the easiest structure in the country to characterise as used exclusively for business, because that is usually what it is, and the relief restriction does not care whether the space sits inside the four walls of the house. If the room genuinely has no other use, expect the relief restriction and price it before you build. If the family uses it as a study or a spare room too, say so in your method note and apportion by time as normal.

Outbuildings raise two smaller points as well: business rates can be triggered where a space is used only for business, and a structure that is not part of the dwelling can fall outside your home insurance unless you tell the insurer.

Worked example: £5,040 of household costs becomes a £205.71 deduction

Bernadette lets four flats and runs them herself from the smallest bedroom, which is also the guest room and where the household desktop lives. Her home has seven rooms if you count the kitchen, living room, dining room and four bedrooms, and exclude the hall and bathrooms. She spends about 10 hours a week on lettings work, and that room is in use for something or other about 35 hours a week.

Bernadette's household running costs, 2026/27

Cost	Annual amount
Electricity	£960
Gas	£840
Water	£420
Broadband	£336
Home insurance	£288
Council tax	£2,196
Total	£5,040

Source: illustrative household bills for a four-bedroom house, 2026/27. Method per HMRC PIM2100, data to August 2026.

Her room fraction is one room in seven, which is 14.29%. Her time fraction is 10 hours out of 35, which is 28.57%. Multiply them and the business fraction is 1/7 x 10/35, which is 10/245, or 4.08%.

Apply that to the bills: £5,040 x 4.08% = £205.71. That is the deduction. As a higher-rate taxpayer Bernadette keeps £82.29 of it; at basic rate she would keep £41.14.

Now compare that with the flat rate she is not allowed to use. At 10 hours a week she averages about 43 hours a month, which is the 25-or-more band at £10 a month, or £120 a year. The rule that does not apply to her would have given her £85.71 less than the rule that does. So the flat rate is not only unavailable, it is also smaller.

If Bernadette rented her home rather than owning it, her rent would join the pot. Add £14,400 of annual rent and the total becomes £19,440, so the same 4.08% fraction gives £793.47 instead of £205.71. Tenants who run a portfolio from home usually have much the larger claim, and no capital gains exposure at all on a property they do not own.

The bigger claim needs an exclusive room, and that room costs £3,909 on sale

The bigger claim is worth £720 a year instead of £205.71, and the condition attached to it is what costs you money later. Make the business use of that room continuous rather than at particular times, so that nothing else happens in there, and the time fraction falls away: Bernadette's claim becomes one seventh of £5,040 rather than 10/245 of it.

That is £514.29 a year more of deduction, worth £205.71 a year of tax at 40%. Over ten years it saves £2,057. Here is what it costs.

TCGA 1992 s.224 deals with a dwelling-house where part is used exclusively for the purposes of a trade or business. In that case "the gain shall be apportioned" and the exemption applies only to the part of the gain attributable to the part not used exclusively for those purposes. Your own home stops being fully covered by Private Residence Relief for as long as the exclusive use lasts.

Bernadette sells her home after 20 years, 10 of them with an exclusive office

Step	Figure
Purchase price	£295,000
Sale price	£565,000
Gain	£270,000
Restricted fraction: 1 room in 7, for 10 years of 20	1/14, or 7.14%
Gain outside Private Residence Relief	£19,285.71
Less annual exempt amount 2026/27	£3,000
Taxable	£16,285.71
Capital Gains Tax at 24%	£3,908.57

Source: gov.uk Capital Gains Tax rates and allowances 2026/27, residential rates 18% and 24%, annual exempt amount £3,000. Data to August 2026.

So the exclusive room saves you £2,057 of income tax over ten years and hands back £3,908.57 when you sell. You are £1,851 down, before you count the extra record keeping and before you notice that you have spent a decade unable to use a room in your own house. If your annual exempt amount is already used against something else, the capital gains figure rises to £4,628.57 and you are £2,571 down.

The arithmetic flips only in narrow cases: a very large home office share, a house with little or no gain, or a home that is not your main residence in the first place. Run the numbers before you decide, not after you have described a room as your office on a tax return.

How to document mixed use so the relief survives

Document it in four short steps: claim on a time fraction, write the method down once a year, record the non-business use, and keep the note with the house papers. None of them takes long, and together they are what lets you prove the position fifteen years later.

Exclusive use is a question of fact, not a label you choose. A room with a sofa bed that guests use four times a year, or a desk that shares space with the family computer, is not used exclusively for business no matter what you call it. The documentation proves facts you already have rather than creating them.

• Claim on a time fraction. A claim built on hours is itself an assertion that the room has other uses, which is why the smaller claim protects itself. Bernadette's 10 hours out of 35 is the evidence.
• Write the method down once a year. One paragraph: the rooms counted, the hours assumed, the bills totalled, the fraction. Date it. This is the document that answers an enquiry and the document that answers the capital gains question on sale.
• Record the non-business use. A calendar note of guest stays, the fact the household printer lives in there, the exercise bike in the corner. You are not building a case, you are noting what is true.
• Keep the note with the house papers. Not just in the tax file for that year. The person who needs it is the person computing your gain two decades from now.

Do this and the question never arises, because the answer to "was any part used exclusively for business" is no, evidenced. For the wider picture on what relief you keep when you sell, see our complete guide to Capital Gains Tax on property.

What if you also work from home as an employee?

Both can be true at once, and the two claims run on separate tracks. Your employer can pay you £6 a week for homeworking under the employment rules. Your lettings apportionment is a deduction against rental profit and covers only the hours you spend on the lettings. Neither one blocks the other.

What you cannot do is count the same hour twice. If that room sees 35 hours of use a week, split as 20 hours of your day job, 10 hours of lettings work and 5 hours of private use, then the lettings fraction is 10 out of 35 and the employment side takes its own route. Bernadette's 4.08% already reflects that split. A fraction that adds up to more than the room's actual use is the first thing an inspector spots.

Company landlords: £312 a year tax free, or charge the company rent

£312 a year, tax free, with no apportionment and no records. A company is an employer and you are its employee, so the homeworking rules that are closed to an individual landlord open up.

The simple route. The company pays you £6 a week, £312 a year, for working at home. No PAYE, no National Insurance, no evidence, no records, and the company deducts the payment against corporation tax. HMRC's guidance is explicit that the employer does not have to justify the amount and the employee does not have to keep records to demonstrate the additional expenditure. Above the guideline rate you need evidence of the actual costs, which is where the simplicity disappears.

The rental route. You grant the company a licence to use a home office at a market rent. Charge £1,800 a year and the company saves £450 of corporation tax at 25%, or £342 at 19%. On your side the £1,800 is property income, against which you deduct your allowable home costs of, say, £720, leaving £1,080 taxed at 40%, which is £432. Net benefit at those rates: £18 a year. If you are a basic-rate taxpayer and the company pays 19%, it is £342 less £216, or £126 a year.

Neither number justifies the paperwork on its own, and there is a sting. A licence at a market rent almost always describes a defined space used by the company, which is the exclusive-use characterisation that brings the relief restriction back to your own home. For most director landlords the £312 allowance is the whole answer, and the rental route only earns its keep where the space is genuinely substantial or the property is not your main residence. If you are still deciding whether a company is the right wrapper at all, start with the 2027 rates and the incorporation decision.

Records and Making Tax Digital: four things per year, built as you go

Keep four things for each tax year: the bills that make up the pot, the room count or floor areas, the hours basis behind your fraction, and the one-paragraph method note. On a £205.71 claim that is a spreadsheet tab, and it is proportionate to what is at stake.

Making Tax Digital changes the timing rather than the rule. Once you are in scope you report property income and expenses in quarterly updates, so the home office figure needs to exist during the year rather than being reconstructed the following January. The practical answer is a fixed quarterly figure, one quarter of your annual estimate, trued up at the final declaration when the actual bills are in. What counts as an acceptable digital record is set out in our guide to digital records, receipts and bank feeds under MTD, and the box the number lands in is covered in our SA105 property pages guide.

Home office costs are one line in a much longer list, and it is rarely the most valuable one. The full set of categories, including the ones landlords most often miss, is in our complete list of landlord tax deductions, and the wider position on how rental profit is taxed is in our complete guide to rental income tax.

Your home office claim is worth £205.71 or £720, and one of them costs £3,908.57

Our landlord tax review rebuilds the apportionment from your actual bills and room use, then sets the resulting fraction against your Private Residence Relief position so both numbers sit on one page. A flat-rate claim taken in error has to be unwound across every year you claimed it. An exclusive-use description left on a return costs £3,908.57 on a £270,000 gain. Ten minutes now is cheaper than either, and cheapest of all while the room is still in use.

External sources used on this page: HMRC PIM2100 on a landlord's own home, ITTOIA 2005 s.272, ITTOIA 2005 s.94H, TCGA 1992 s.224, gov.uk simplified expenses, gov.uk Capital Gains Tax rates and HMRC EIM01476 on homeworking payments.