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5 Critical Facts About The £300 HMRC Deduction Rule You Must Know For The 2025/26 Tax Year

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The '£300 HMRC Deduction Rule' is one of the most misunderstood tax reliefs available to UK workers, and getting the details wrong can cost you hundreds. As of today, December 19, 2025, the actual flat-rate allowance for employees claiming tax relief for working from home is not £300, but a slightly higher figure. This deduction is a crucial mechanism for recouping additional household costs incurred when your job requires you to work remotely.

This comprehensive guide cuts through the confusion, providing the absolute latest information for the 2025/2026 tax year. We will clarify the exact amount, the stringent eligibility criteria, and the simple process you need to follow to successfully claim this valuable tax relief, whether you are an employee or self-employed.

Fact 1: The '£300 Rule' is Actually a £312 Flat-Rate Allowance

The number most people search for—£300—is a common rounding or a historical reference. The precise flat-rate deduction that employees can claim for additional household costs when working from home for the 2025/2026 tax year is £312.

  • The Breakdown: This is based on a flat rate of £6 per week.
  • Annual Total: Over a full 52-week tax year, this equates to a total deduction of £312.
  • What it Covers: This flat rate is designed to cover the reasonable increase in household expenses such as heating, electricity, and business-related water usage. It does not cover broadband or rent/mortgage payments.

This £6 per week allowance is a simplified expenses option. It means you do not need to keep detailed records or receipts for the extra costs—you simply claim the flat rate.

Fact 2: Eligibility is Now Stricter for Employees in 2025/26

A significant change from the temporary rules during the pandemic is the return to pre-2020 eligibility criteria. You cannot simply choose to work from home and claim the relief; your employer must require you to work from home.

Key Eligibility Criteria for the £312 Deduction:

To be eligible for the full £312 flat rate deduction in the current 2025/2026 tax year, you must meet all the following conditions:

  • Mandatory Working from Home: Your job must require you to work from home, and you must incur additional household costs as a result.
  • No Office Space Available: You must not have a suitable office or workspace available to you at your employer's premises.
  • Not a Choice: If you work from home by choice, or as part of a hybrid arrangement where you could use the office but choose not to, you are generally not eligible for the flat rate.
  • One Day is Enough: You only need to have been required to work from home for one day during the tax year to be able to claim the full annual flat rate deduction.

The relief is applied against your taxable income. For a basic rate (20%) taxpayer, a £312 deduction results in a tax saving of £62.40. For a higher rate (40%) taxpayer, the saving is £124.80.

Fact 3: How to Claim the Flat-Rate Deduction (P87 vs. Self Assessment)

The method you use to claim the working from home tax relief depends on whether you file a Self Assessment tax return or not. The process is straightforward, but you must use the correct channel.

For Employees (No Self Assessment): Claim via Form P87

If you are an employee and do not usually complete a Self Assessment tax return, you must use the HMRC online portal to fill out a P87 form.

  • Online P87: This is the quickest and easiest way to claim. You will need your National Insurance number, your employer's PAYE reference number, and details of the expenses you are claiming (the £312 flat rate).
  • Tax Code Adjustment: Once approved, HMRC will usually adjust your tax code (e.g., in the following tax year) to give you the relief automatically.
  • Backdating Claims: You can backdate a claim for the current tax year and the four previous tax years, provided you met the eligibility criteria during those periods.

For Employees (With Self Assessment): Claim on Your Tax Return

If you are already registered for and complete a Self Assessment tax return, you should claim the £312 flat rate deduction in the employment section of your tax return.

Fact 4: The Self-Employed Use a Different Flat-Rate System

The £312 flat rate is specifically for employees. Self-employed individuals (sole traders and partnerships) who work from home must use the "Simplified Expenses" system for their "Use of Home as Office" deduction.

Simplified Expenses allow self-employed individuals to claim a flat rate based on the number of hours they work from home each month, eliminating the need to calculate actual household costs.

Self-Employed Flat Rates for Use of Home (2025/26):

The monthly flat rates are:

  • 25 to 50 hours: £10 per month.
  • 51 to 100 hours: £18 per month.
  • 101 hours or more: £26 per month.

If a self-employed person works 101+ hours from home every month for a full year, their total deduction would be £312 (£26 x 12 months)—coincidentally matching the employee flat rate. This method is a time-saver, though calculating actual costs might yield a higher deduction for those with very high utility bills.

Fact 5: The Alternative: Claiming Actual Costs

While the £312 flat rate is convenient, it may not be the best option for everyone. Both employees and the self-employed have the option to claim their actual, itemised additional costs if they believe the total is substantially higher than the flat rate.

To claim actual costs, you must:

  • Keep Meticulous Records: You must retain all receipts and bills for the additional costs incurred, such as increased electricity or gas usage.
  • Calculate the Business Proportion: You must calculate a reasonable proportion of the total cost that relates to your work. This is typically done by calculating the percentage of time you use the space for work and the percentage of the home that space occupies.
  • Justify the Claim: HMRC may ask for evidence to justify that the costs were incurred "wholly, exclusively, and necessarily" for the purposes of your employment or business.

For most employees, the £312 flat rate is the simplest and most efficient way to access this tax relief, avoiding the complexity of detailed calculations and record-keeping.

5 Critical Facts About the £300 HMRC Deduction Rule You Must Know for the 2025/26 Tax Year
300 hmrc deduction rule
300 hmrc deduction rule

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