Can I Claim My Home Office for MTD?

Understanding home office expense claims under Making Tax Digital, flat rate vs actual costs, what you can and can’t claim, and how to record deductions correctly in your MTD software.

The Short Answer

Yes, you can claim home office expenses under Making Tax Digital but the rules are the same as they’ve always been under Self Assessment. MTD doesn’t change what you can claim, only how you record and report it.

You have two options:

1. Simplified expenses (flat rate) £10 to £26 per month depending on hours worked
2. Actual costs — proportion of household bills based on business use

Both are acceptable for MTD. You just need to record them digitally in your MTD-compatible software and include them in your quarterly updates.

Who Can Claim Home Office Expenses?

You can claim home office expenses if you:

✓ Work from home regularly (not just occasionally)
✓ Use a specific area of your home exclusively or mainly for business
✓ Are self-employed or a sole trader (not PAYE employed working from home)
✓ Don’t have separate business premises

You cannot claim if:

• You work from home occasionally (less than 25 hours/month)
• Your employer provides you with an office but you choose to work from home
• You’re employed (PAYE) home working allowances are different for employees
• You use your home space exclusively for personal use with no dedicated work area

Landlords: If your only income is rental property, you typically can’t claim home office expenses unless you actively manage properties as a business (e.g., letting agent services).

Option 1: Simplified Expenses (Flat Rate)

This is the easiest method. HMRC provides a flat monthly rate based on hours worked from home.

Example:

You work from home 120 hours per month (roughly 6 hours per day, 5 days a week).

• Monthly deduction: £26
• Annual deduction: £312 (£26 × 12 months)

You claim £312 per year in home office expenses.

Pros of Flat Rate

✓ Simple no need to calculate actual costs
✓ No receipts required just track your hours
✓ Quick to record one line in your accounts per month
✓ HMRC rarely challenges it accepted method

Cons of Flat Rate

✗ Usually lower than actual costs (especially if you have high bills)
✗ Doesn’t reflect your actual expenses
✗ Caps at £26/month (£312/year) no matter how much you spend

How to Record in MTD Software

Monthly entry:

1. Go to Expenses → Add Expense
2. Category: Home Office Expenses or Use of Home
3. Amount: £10, £18, or £26 (depending on hours worked)
4. Description: “Home office simplified expenses (120 hours)”
5. Date: Last day of the month

Quarterly reporting:
Your software totals these monthly entries automatically. If you claim £26/month for Q1 (April, May, June), your Q1 update shows £78 in home office expenses.

Option 2: Actual Costs (Proportionate Method)

This method lets you claim a proportion of your actual household bills based on business use of your home.

What You Can Claim

Allowable expenses:

• Mortgage interest (business proportion only) OR rent (business proportion)
• Council tax (business proportion)
• Home insurance (building and contents)
• Utilities (electricity, gas, water)
• Internet and phone (business proportion)
• Cleaning (if you clean business areas)
• Repairs and maintenance (business areas only)

Not allowable:

• Mortgage capital repayments (only interest is allowable)
• Improvements (new extension, conservatory these are capital expenses)
• Personal groceries or household items unrelated to work

How to Calculate the Proportion

Method 1: Rooms basis

If you have a dedicated office room:

• Number of rooms in home: 6
• Rooms used for business: 1
• Business proportion: 1/6 = 16.67%

Annual bills:

• Mortgage interest: £6,000
• Council tax: £2,000
• Utilities: £1,800
• Insurance: £800
• Internet: £600
• Total: £11,200

Business proportion: £11,200 × 16.67% = £1,867 per year

Method 2: Floor area basis

If you don’t have a dedicated room but use part of a room:

• Total home area: 1,200 sq ft
• Office area (desk/corner): 150 sq ft
• Business proportion: 150/1,200 = 12.5%

Annual bills: £11,200
Business proportion: £11,200 × 12.5% = £1,400 per year

Method 3: Hours basis

If you use a room both personally and for business:

• Total hours per week the room is available: 168 (24×7)
• Business hours per week: 40
• Business proportion: 40/168 = 23.8%

Then apply this percentage to your bills.

Pros of Actual Costs

✓ Higher deduction (usually £1,000–£3,000/year vs £312 flat rate)
✓ Reflects real expenses
✓ Can claim internet, phone, utilities specifically

Cons of Actual Costs

✗ More complex to calculate
✗ Requires receipts for all bills
✗ Must justify your calculation if HMRC asks
✗ Need to recalculate if usage changes

How to Record in MTD Software

Option A: Monthly allocation

Each month, calculate your business proportion of bills and record as expenses:

• Mortgage interest (business %): £83
• Council tax (business %): £28
• Utilities (business %): £25
• Insurance (business %): £11
• Internet (business %): £8
• Total: £155/month

Option B: Annual adjustment

Record actual bills as paid throughout the year, then make a year-end adjustment:

1. Record full bills as “Home expenses personal/business mixed”
2. At year-end, calculate total business proportion
3. Create an adjustment entry to move the business portion to “Home office expenses”

We recommend Option A (monthly) — it’s clearer for quarterly updates.

What If You Have a Dedicated Office Room?

If you use a room exclusively for business (no personal use), you can claim:

✓ 100% of expenses relating to that room (decorating, heating, lighting)
✓ Proportionate share of whole-house expenses (council tax, insurance, mortgage interest)

Capital Gains Tax warning: If you claim a room is used exclusively for business, you may face CGT when you sell your home (the business portion isn’t covered by Private Residence Relief).

Solution: Claim the room is used mainly (not exclusively) for business. You can still claim the business proportion, but your entire home remains CGT-exempt under Private Residence Relief.

MTD-Specific Considerations

Recording in Your MTD Software

Create a category:

• Category name: “Home Office Expenses” or “Use of Home”
• Type: Expense
• Tax treatment: Allowable business expense

Monthly routine:

1. If using flat rate: Record £10/£18/£26 at month-end
2. If using actual costs: Record your calculated business proportion of bills

Quarterly updates: Your software automatically totals home office expenses for each quarter.

Example Q1 update (flat rate):

Home Office Expenses (Apr-Jun): £78 (£26 × 3 months)

Example Q1 update (actual costs):

Home Office Expenses (Apr-Jun): £465 (£155 × 3 months)

Keeping Records

For flat rate:

• Log of hours worked from home (simple spreadsheet or diary)
• Retain for 5 years

For actual costs:

• Bills for all claimed expenses (mortgage statement, council tax, utilities, insurance, internet)
• Calculation showing business proportion
• Photos/measurements if using floor area method
• Retain for 5 years

MTD requirement: Receipts must be stored digitally. Take photos via your MTD software’s mobile app or scan and attach PDFs.

Action Steps

This week:

1. Decide which method you’ll use (flat rate or actual costs)
2. Set up tracking:
   • Flat rate: Create a simple hours log
   • Actual costs: Gather bills and calculate your business proportion
3. Create the expense category in your MTD software

Each month:

1. Record your home office expense:
   • Flat rate: £10, £18, or £26 based on hours
   • Actual costs: Your calculated monthly business proportion
2. Attach supporting evidence (hours log or bills)

Each quarter:

Your MTD software totals home office expenses automatically when generating quarterly updates. No extra action needed.

Need help calculating your home office deduction?

We offer a free home office calculation service for our clients:

• Review your bills
• Calculate optimal business proportion
• Set up your MTD software
• Show you how to record it monthly

Book a free consultation or call 03301 332 533

About This Guide

Written by the MTD Compliance Team at MakingTaxesDigital.com – UK accountants helping sole traders and landlords maximize legitimate deductions while staying HMRC-compliant.

Questions? Email hello@makingtaxesdigital.com

Last updated: 8 January 2026