Making use of the property allowance
If you’re self-employed, work from home, or run a small business from residential premises, you’ve probably heard about the property allowance. It’s one of the most straightforward ways to reduce your tax bill without keeping detailed records of every invoice and expense. Yet many people aren’t using it—or don’t fully understand how it works. Let’s break it down and see whether it could work for you.
What is the property allowance?
The property allowance is a fixed deduction from your trading income if you use part of your home for business purposes. Instead of calculating actual property expenses (rent, council tax, utilities, insurance, repairs), you can claim a flat-rate allowance. For the 2024/25 tax year, you can claim up to £1,260 per year—that’s £105 per month.
This applies whether you’re a sole trader, a partner in a partnership, or running as a limited company (though directors can’t claim it themselves). It’s available to anyone who uses domestic accommodation for their trade or business.
How does it work?
The beauty of the property allowance is its simplicity. You don’t need to:
- Work out what percentage of your home is business use
- Calculate utilities, heating, or council tax apportionments
- Keep receipts for home maintenance
- Complete detailed working papers
Instead, you simply claim the allowance on your Self Assessment tax return. If you’re using accounting software, there’s usually a dedicated field. If you’re completing a paper return, it goes on the Self Employment supplementary pages.
The allowance covers rent, council tax, business rates, water, electricity, heating, insurance, and structural repairs—basically everything to do with maintaining your property. You can’t claim for furniture, equipment, or phone bills alongside it.
Who should claim it?
The property allowance makes most sense for people whose actual property expenses are lower than £1,260 per year, or where working out an exact apportionment would be complicated and time-consuming.
For example, if you’re a consultant working from a spare bedroom, a freelance designer using the dining table, or a bookkeeper running a one-person operation, the fixed allowance is almost certainly easier than tracking utilities. You’ll get relief regardless of your actual costs.
However, if you run a larger operation from home—say, you operate a training business or a workshop that uses significant energy or premises space—you might actually spend more than £1,260 on property costs. In that case, you could claim actual expenses instead. You’d need to work out the business-use proportion of your home and claim the relevant share of heating, electricity, council tax, business rates, and rent. This requires more record-keeping but could yield a larger deduction.
You can’t claim both: it’s either the allowance or actual expenses, whichever is better for you.
Making the most of it
If you do use the property allowance, remember that it reduces your taxable trading income. With the basic rate tax threshold at £12,570 for 2024/25, every pound of allowance is worth 20p in tax relief (or 40p if you’re a higher-rate taxpayer).
That said, the allowance is capped. You can’t claim more than £1,260 per year, even if you genuinely spend far more. And if you’re in partnership, each partner can claim their own allowance based on their actual use of home premises—so if two partners both work from home, each can claim up to £1,260.
Also note: claiming the property allowance doesn’t affect your council tax band or create complications with business rates. It’s purely a tax relief mechanism.
When to review your position
It’s worth revisiting this annually. If your circumstances change—for instance, you move to a larger office space, rent commercial premises, or start running the business from a dedicated studio—you may no longer be eligible. Similarly, if you’ve previously claimed actual expenses but now find the allowance simpler, you can switch.
Make a note on your working papers about which method you’ve chosen and why. This helps both you and us at tax time, and it means you’re never caught out by a Revenue enquiry.
The property allowance is a genuine gift from HMRC—straightforward, uncomplicated, and available to almost anyone running a business from home. If you’re not claiming it, there’s no reason not to. If you’re already claiming it, well done: you’re getting proper tax relief without the admin headache.
For tailored advice, contact Severn Accounting—we’re here to help.