Comparison · Tax Relief · 2026/27
Working From Home: Flat Rate vs Actual Costs in 2026/27
HMRC offers two ways to claim tax relief on working from home costs: the flat rate of GBP 6 per week (GBP 312 per year) which requires no receipts and no complicated calculations, or the actual costs method where you claim the real additional expenditure on gas, electricity, broadband, and other household bills based on a pro-rata calculation. The flat rate is simpler and safer -- but if you work from home full-time and your energy bills are high, actual costs can deliver a significantly larger deduction. This guide compares both methods side by side, walks through a real worked example, and explains when each approach makes sense for employees and the self-employed in 2026/27.
2026/27 Key Figures at a Glance
- Flat rate (employees and self-employed): GBP 6/week = GBP 312/year -- no receipts required
- Self-employed simplified expenses: GBP 10-GBP 26/month depending on hours (25-100+ hrs/month)
- Actual costs method: Metered bills apportioned by rooms and hours -- receipts required
- Employer exemption: Employers can pay up to GBP 6/week tax-free; any excess must be evidenced
- Basic rate tax saving (flat rate): GBP 312 x 20% = GBP 62.40/year
- Higher rate tax saving (flat rate): GBP 312 x 40% = GBP 124.80/year
- Claim period: Up to 4 prior tax years can be backdated; 2022/23 deadline is 5 April 2027
Side-by-Side Comparison
| Factor | Flat Rate (GBP 6/week) | Actual Costs (pro-rata bills) |
|---|---|---|
| Annual claim (typical) | GBP 312 fixed (52 weeks x GBP 6) | Varies -- GBP 200 to GBP 1,500+ depending on usage and home |
| Evidence required | None -- no receipts or bills needed | Gas, electricity, broadband bills; apportionment workings |
| Calculation complexity | Minimal -- multiply weeks by GBP 6 | Moderate -- room count, hours worked, bill apportionment |
| Employer-reimbursed offset | Employer GBP 6/week payment extinguishes the claim entirely | Claim reduced only by amount employer has already paid; remainder claimable |
| Self-employed simplified rate | Separate HMRC simplified expenses: GBP 10-GBP 26/month by hours | Full actual costs available including rent proportion (not mortgage capital) |
| Risk of HMRC query | Very low -- HMRC-approved fixed amount | Higher -- especially for large claims; records must be watertight |
| Max potential claim | GBP 312/year -- hard ceiling | Unlimited in theory -- reflects real additional costs incurred |
| Best suited to | Hybrid workers, low energy users, anyone without metered bills | Full-time home workers, high energy bills, self-employed with home office |
The Flat Rate: GBP 6 per Week Explained
HMRC introduced the GBP 6/week flat rate to give employees a straightforward way to claim relief on the additional household costs of working from home without needing to keep records. The rate was increased from GBP 4/week to GBP 6/week in April 2020 and has remained at GBP 6/week for 2026/27.
To qualify, you must be required to work from home by your employer -- not merely choosing to do so for personal convenience. HMRC accepts that the requirement may be due to the nature of the job (for example, a role with no fixed office) or an employer instruction. During 2020-2022 HMRC relaxed this requirement widely, but from 2022/23 onwards normal rules apply: you need a genuine employer requirement.
Employees claim via a P87 form or online through their Personal Tax Account at gov.uk. You can also include the claim on a Self Assessment return if you file one. Claims can be backdated by up to four tax years, so in 2026/27 you can still claim for 2022/23, 2023/24, 2024/25, and 2025/26 if you have not already done so.
The tax saving is modest but effortless. A basic rate (20%) taxpayer saves GBP 62.40 per year; a higher rate (40%) taxpayer saves GBP 124.80; an additional rate (45%) taxpayer saves GBP 140.40. If you are just doing the single-year claim it takes around five minutes online and HMRC typically processes it by adjusting your PAYE tax code.
The Actual Costs Method: How the Calculation Works
The actual costs method calculates the additional amount you genuinely spend on household bills because of working from home, then apportions that amount to derive a claimable deduction. HMRC expects the calculation to reflect use -- both the proportion of the home used for work and the time it is used for work.
The standard approach has two steps. First, calculate the proportion of your home used for work: count the total number of rooms in the property (excluding bathrooms and hallways), then divide by the number used exclusively or mainly for work. A 5-room house with one dedicated office gives a 1/5 (20%) room ratio. Second, calculate the time proportion: if you work 9 hours a day and the room is available 18 hours a day, the time ratio is 50%. Combining these gives an overall use fraction: 20% x 50% = 10% of total bills.
Not all bills qualify. For employees the allowable costs are typically limited to gas, electricity, and metered water -- the items directly increased by having you at home working. Broadband is generally disallowed for employees because you would pay for it anyway. For self-employed people the range of allowable costs is wider: rent, broadband (the additional business proportion), council tax, and buildings insurance can all be included in addition to utilities.
The difficulty is evidence. HMRC expects you to hold actual bills, smart meter readings, or provider statements, plus a written calculation showing your apportionment methodology. You do not submit these with your return but must produce them if asked. A self-employed person whose claim is queried who cannot produce bills and workings faces disallowance of the entire deduction plus potential penalties.
Worked Example: Actual Costs vs Flat Rate
Scenario -- Sarah, self-employed consultant, 5-room house, full-time WFH
Sarah works from home full-time as a freelance consultant. Her home has 5 rooms (excluding bathrooms and hallways): a kitchen/diner, a living room, a bedroom, a spare bedroom used as her office, and a utility room. One room (the office) is used exclusively for work.
Room proportion: 1/5 = 20%
She works approximately 9 hours a day, 5 days a week. The house is in use roughly 18 hours a day (she sleeps 6 hours). Time proportion: 9/18 = 50%.
Combined use fraction: 20% x 50% = 10%
Annual household bills:
- Gas and electricity (dual fuel): GBP 2,400/year
- Broadband (business-use element -- full cost included for self-employed): GBP 600/year
- Council tax: GBP 1,800/year
- Buildings and contents insurance: GBP 480/year
- Total bills: GBP 5,280/year
Actual costs claim: GBP 5,280 x 10% = GBP 528/year
Flat rate alternative (self-employed simplified, 160 hrs/month): GBP 26/month x 12 = GBP 312/year
Actual costs advantage: GBP 528 vs GBP 312 = GBP 216 more deducted
At the basic rate (20%): additional tax saving of GBP 43.20/year
At the higher rate (40%): additional tax saving of GBP 86.40/year
When the flat rate wins -- Hybrid worker, low usage
Tom works from home 2 days per week in a 6-room house. He does not have a dedicated office room -- he works at the kitchen table.
An actual costs calculation might yield: 1/6 room proportion x 2/7 days = roughly 5% of bills. His utility bills total GBP 1,800/year, so 5% = GBP 90/year -- less than the GBP 312 flat rate. Tom should use the flat rate.
Flat rate advantage for Tom: GBP 312 vs GBP 90 actual = GBP 222 more deducted
And with no receipts or paperwork required
Pros and Cons
Flat Rate -- GBP 6/week
Pros
- No receipts, bills, or calculations needed
- Very low HMRC query risk -- HMRC-approved amount
- Quick to claim -- 5 minutes online via Personal Tax Account
- Can be backdated up to 4 years
- Available to employees and self-employed alike
- Suitable even if bills are not metered
Cons
- Hard ceiling of GBP 312/year -- cannot exceed it
- Full-time home workers may leave significant relief unclaimed
- Does not scale with actual energy costs or home size
- Employer reimbursement of GBP 6/week wipes out the claim entirely
Actual Costs Method
Pros
- No upper limit -- reflects real expenditure
- Full-time home workers in larger homes can claim GBP 500-GBP 1,500+
- Self-employed can include rent, council tax, and insurance
- Claim scales with actual energy price increases
- Partial employer reimbursement does not extinguish the claim
Cons
- Requires metered bills and written apportionment records
- More complex calculation -- room count and time fractions
- Higher HMRC scrutiny risk for large claims
- Mortgage interest can trigger capital gains tax complications for owners
- Employees face stricter limits than self-employed
Which Method Should You Use?
For most employees working from home one to three days per week, the flat rate of GBP 6/week is the sensible choice. The paperwork burden is nil, the HMRC query risk is negligible, and the actual additional costs for part-time home working are rarely much above GBP 312/year anyway. Claiming the flat rate online takes five minutes.
If you work from home full-time as an employee and your energy bills are high, it is worth doing the actual costs calculation to see whether it exceeds GBP 312. If your additional utility costs (gas and electricity only for employees) are, say, GBP 50/month = GBP 600/year and your room-and-time fraction is 15%, that gives GBP 90/year -- still less than the flat rate. But in a larger property with higher bills and a dedicated office, the number can exceed GBP 312 and it becomes worth the additional paperwork.
For the self-employed, the calculation is more powerful because the range of allowable costs is much wider. Including rent (if renting), council tax, insurance, and broadband alongside utilities can push the actual costs claim to GBP 800-GBP 1,500 per year for a full-time home worker -- two to five times the simplified expenses rate. The self-employed should always compare both methods before filing.
You can switch methods year by year. There is no commitment. HMRC does not penalise you for using the flat rate one year and actual costs the next -- simply use whichever gives the larger deduction each year.