A self-employed individual who works from home has 2 choices for claiming a tax deduction for the associated costs:
1. Claim a monthly fixed rate allowance of between £10 & £26 p.m (the exact amount depends on the number of hours you work from home – see
https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home
OR
2. Claim a ‘reasonable’ proportion of the ‘dual purpose’ costs of running the home, which effectively reflects just the costs of the business usage – eg, a proportion of mortgage interest, light and heat costs, insurance, council tax, repairs & maintenance, cleaning etc
(NB. It is up to the taxpayer to decide what constitutes a ‘reasonable’ proportion in light of their own particular circumstances; but don’t overdo it unless you want HMRC on your case!)
In any event, the 2nd option often results in a much bigger tax deduction; for example:
Edward works full time from home refurbishing furniture. He uses an extension, which makes up 25% of the total floor space in his house, as his workshop and office. His dual purpose expenditure totals £10,000 p.a. On the basis that the extension is used 80% of the time for business purposes, Edward claims 20% (25% x 80%) of £10,000 = £2000 as a tax deduction for the use of his home.
If he’d claimed the fixed rate he could only claim a deduction of £312, so it was worth doing the numbers and claiming on the basis of actual expenditure because it results in an additional deduction of £1688.