Working From Home Tax Relief: What UK Business Owners Can Claim in 2026

By Jessica

If you are one of the millions of UK small business owners or employees who swapped a daily commute for a desk in the spare room, you have likely benefited from some form of tax relief. But as we move through 2026, the rules are shifting. HMRC has tightened the belt on how individuals claim these expenses, making it more important than ever to understand exactly what you are entitled to and how the process has changed.

Whether you are a sole trader, a limited company director, or an employee with a "work from home" contract, the way you get tax back on your heating, lighting, and broadband isn't the same as it was a few years ago. In this guide, we will break down the 2026 rules in plain English so you can ensure you are not leaving money on the table.

The Big Change: April 2026 and the End of Standalone Claims

The most significant update for 2026 concerns employees and limited company directors. As of April 6, 2026, the ability for individuals to claim "Working From Home" tax relief directly from HMRC via a P87 form or through their Self Assessment has been largely abolished for unreimbursed expenses.

In previous years, if your employer didn't pay you a homeworking allowance, you could tell HMRC, "I worked from home, please lower my tax bill by the equivalent of £6 per week." From the 2026/27 tax year onwards, this standalone claim route is gone.

Now, the tax-free benefit must come via your employer. This means if you own a limited company, you (as the employer) must pay yourself (as the employee) the allowance for it to be tax-efficient. If you are an employee of another firm and they choose not to reimburse you, you can no longer claim that tax relief back directly from the government.

For Limited Company Directors: The Reimbursement Strategy

If you run your own business through a limited company, you are technically an employee of that company. To keep claiming your working-from-home tax relief in 2026, you need to ensure your company is set up to reimburse you correctly.

1. The £6 Per Week Tax-Free Allowance

Your company can pay you £6 per week (£26 per month or £312 per year) completely tax-free. You do not need to provide receipts to HMRC for this amount, provided you are regularly required to work from home. This is often the simplest route for limited company accountants to recommend because it involves the least amount of admin.

2. Claiming Actual Costs

If your actual additional household costs are much higher than £312 a year, perhaps you have a high-energy studio or use significant heating, you can claim the exact amount. However, this requires meticulous record-keeping. You must be able to prove that these costs are additional (i.e., your bill went up because you were working, not just because energy prices rose).

3. Rental Agreements

Some directors choose to create a formal license agreement between themselves and their company to "rent" an office space in their home. This can allow for higher claims but comes with potential Capital Gains Tax implications when you eventually sell your home. Always consult a professional via our find an accountant service before taking this route.

Sole Traders: Business as Usual (Mostly)

If you are a sole trader or a partner in a business, you are in a different category. You don't have an "employer" to reimburse you, so you still claim your home office expenses as a business cost on your Self Assessment tax return.

For sole traders, HMRC offers two main ways to calculate the claim:

Simplified Expenses (The Flat Rate)

This is a tiered system based on the number of hours you work from home each month. It is incredibly simple and saves you from calculating the percentage of every utility bill.

• 25 to 50 hours/month: £10 per month

• 51 to 100 hours/month: £18 per month

• 101 or more hours/month: £26 per month

While this is easy, it often results in a lower claim than calculating actual costs, especially if you work full-time from a dedicated home office.

The Apportionment Method (Actual Costs)

This involves taking your total household bills, rent/mortgage interest, council tax, electricity, gas, and water, and dividing them by the number of rooms in your house and the time spent working.

For example, if you have 5 rooms and use 1 as an office 90% of the time, you would claim roughly 1/5th of 90% of your total bills. This can significantly reduce your tax bill if you live in a large house or have high overheads. If you want to understand other costs you may be able to deduct, see 10 Allowable Expenses UK Small Businesses Are Missing in 2026.

What Records Do You Need to Keep in 2026?

HMRC is becoming stricter about evidence. Whether you are using the simplified method or claiming actual costs, you should keep a digital folder of the following. If you need a refresher on the wider rules behind small business tax, read Small Business Tax 101: A Beginner's Guide to Mastering Your Finances.

• Utility Bills: Gas, electricity, and water bills for the entire tax year.

• A Work Log: A simple diary or spreadsheet showing the days and hours you worked from home. This is vital if you are using "Simplified Expenses" to prove you hit the hour thresholds.

• Employment Contract/Policy: If you are a director or employee, have a written document stating that you are required to work from home. HMRC rarely accepts "choice" as a reason for tax relief; it usually needs to be a business requirement.

• Broadband and Phone: Keep separate records for any business-specific calls. Remember, you generally cannot claim for a broadband connection that you would have paid for anyway for personal use.

What You Cannot Claim

It is just as important to know what is off-limits. Claiming for these can trigger an HMRC inquiry:

1. Fixed Costs (for Employees/Directors): Unless you are a sole trader, you generally cannot claim for mortgage interest, rent, or council tax. These are costs you would pay regardless of whether you worked from home or in an office.

2. General Household Upkeep: You cannot claim for a new kitchen because you "eat lunch there" or for general house repairs.

3. The "Choice" Factor: If your company has a perfectly good office in town and you simply prefer to work from your garden pod, HMRC may reject your claim for tax-free reimbursements.

Is It Still Worth It?

In short: Yes.

While £6 a week might not seem like a fortune: totalling £312 a year: it is a "top-line" deduction. For a higher-rate taxpayer, that is over £120 in actual cash stayed in your pocket. For sole traders using the apportionment method, the savings can be in the thousands.

However, the 2026 landscape is more about compliance than ever before. With the direct claim route for employees removed, you must ensure your payroll and company accounts are updated to handle these payments as reimbursements.

How Accountant Search Can Help

Navigating the transition into the 2026/27 tax year can be a headache, especially with the changing rules for directors and employees. Are you claiming enough? Are you claiming too much and risking a fine?

At Accountant Search, we specialize in connecting SME owners with local experts who understand the nuances of the UK tax system. Whether you need a specialist in VAT advice or a dedicated partner for your limited company, we can match you with the right pro.

Don't guess your tax relief: get it right the first time. Check out our blog for more tips, read Accounting Services UK: The Complete Guide to Finding the Right Accountant for Your Business, or use our search tool to find an accountant today.

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