Working from home: the £10, £18 or £26 a month flat rate for a sole trader client, worked

A client who runs a small business from a spare room asks what they can claim for the heating, electricity and the rest of the house. For a sole trader there are two routes: work out the actual business share of each bill, or use a flat rate by hours. This guide works both for one example client.

What the source says

GOV.UK says simplified expenses are open to sole traders and to business partnerships with no companies as partners, and that limited companies, and partnerships that include one, cannot use them. They are optional. The flat rates cover three areas: some vehicle costs, working from home, and living at business premises. Every other expense is still worked out at actual cost.

For working from home the page gives the monthly flat rate by hours worked at home:

Under 25 hours in a month, the page says the flat rate cannot be used. The flat rate does not cover telephone or internet costs; the business share of those is worked out from the actual bills.

The sums: a full year at each band

The yearly figure is the monthly rate times 12.

Check: £10 x 12 = £120; £18 x 12 = £216; £26 x 12 = £312.

A year where the hours change

The band is set month by month, not once a year. An example client works 40 hours a month for 6 months, 80 hours for 4 months and 110 hours for 2 months.

Check: 6 + 4 + 2 = 12 months; £60 + £72 + £52 = £184. A month under 25 hours would add £0 and the client would have to use actual costs for that month if they wanted a claim.

Flat rate or actual costs

The flat rate is easy to evidence, but it can be lower than the true figure. The break-even for a client at the top band is £312 / 12 = £26 a month. If the real business share of heating, light and similar bills is above that, actual costs give a bigger deduction, but they need the bills and a sound method.

An illustration, with invented figures: household bills of £2,400 a year, and one room in five used only for the business, gives £2,400 x 1/5 = £480. Against £312 that is £480 - £312 = £168 more. At an assumed 20% tax rate (a figure chosen for the example, not read from a source) the difference in tax is £168 x 20% = £33.60. Whether a time-based share of the room is also needed is not something I read, so a practice should work that out for the client.

Points to check for the client

• Is the client eligible? A company director cannot use this flat rate, so a limited company client needs a different arrangement.
• Phone and internet. Claimed on top, at actual business share.
• Hours. Keep a simple record of hours worked at home each month, because the band depends on it.
• Related guides. The same client may ask about the trading allowance against expenses and mileage for their own car, which is another simplified expenses area.

What I did not read

I did not read the GOV.UK page on living at business premises, the vehicle flat rates beyond the linked mileage guide, or the HMRC manual on use of home as office. I did not read whether a client must stick with one method year to year; the page only says the choice is optional. The 20% rate and the household figures above are illustrations, not a client's numbers.

Overlyft builds AI staff who join your practice team and take the monthly hours log a sole trader client sends in, work out the band for each month and the yearly claim against actual costs, and show the result for a person to approve before it goes on a return.

This is general information, not legal or financial advice. Check the GOV.UK and HMRC pages for your client's case.