Premises utilities

Conditions

1. GOV.UK's self-employed expenses guidance lists utility bills, and business and water rates, among the rents, rates, power and insurance costs you can claim. HMRC's manual says expenses connected with premises or land occupied by a trader for the purposes of their trade will normally be allowed as a deduction unless the expenses relate to a capital matter (BIM46801).
2. Sole trader: no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade, but if an expense is incurred for more than one purpose that does not prohibit a deduction for any identifiable part or identifiable proportion of it incurred wholly and exclusively for the trade (section 34 ITTOIA 2005). Limited company: the same two rules are in section 54 CTA 2009. GOV.UK says you cannot claim for any non-business use of premises.
3. Working out the business proportion: HMRC's manual says that for some classes of expense, such as use of home as office, the pattern of usage lends itself to a statistical approach, where a detailed review for a representative period can be used to establish the amount of the total expenditure that is deductible, and that it is sensible to continue to use this proportion until the underlying circumstances change (BIM37007).
4. Living at your business premises: a sole trader, or a partnership with no company partners, whose premises are used mainly for the business but are also their home can instead use simplified expenses. You take the expenses for the premises and subtract a flat rate for non-business use of £350 a month for one relevant occupant, £500 for two, or £650 for three or more, for 2026/27 (section 94I ITTOIA 2005). GOV.UK's examples are a guesthouse, bed and breakfast or small care home. Limited companies cannot use simplified expenses.
5. Installing or replacing equipment is not a utility bill. GOV.UK says that for alterations to install or replace equipment you claim allowable expenses if you use cash basis accounting and capital allowances if you use traditional accounting, and that if you use traditional accounting you can claim capital allowances for some integral parts of a building, for example water heating systems. The premises-repairs entry covers where that line falls.
6. Employee: an employer's premises costs are not the employee's to claim. An employee's general deduction requires that the employee is obliged to incur and pay the amount as holder of the employment, and that it is incurred wholly, exclusively and necessarily in the performance of the duties of the employment (section 336 ITEPA 2003). For costs of working at home, HMRC's manual says that from 6 April 2026 onwards a deduction from earnings is no longer permitted for an employee's additional household expenses (EIM32759, section 360B ITEPA 2003), and GOV.UK says that from the tax year 6 April 2026 to 5 April 2027 you will not be able to claim tax relief for working from home. GOV.UK also says you can still claim for the 4 previous tax years, and that you can claim only if you have to work from home, not if you choose to; the home-office entry covers that.
7. Separately, an employer can make exempt payments to meet or reimburse reasonable additional household expenses that an employee incurs in carrying out the duties of the employment at home under homeworking arrangements, which HMRC says will typically include the additional costs of heating and lighting the work area or the metered cost of increased water use (EIM01474). That exemption only applies to payments made by the employer and does not entitle an employee to deduct unreimbursed household expenses (EIM01472).

Common mistakes

• Including household bills for working at home under this entry — the home-office entry covers those.
• Claiming the whole bill for premises that are also lived in, rather than the identifiable business part or proportion (section 34 ITTOIA 2005) or, where you qualify, the living-at-premises flat rate (section 94I ITTOIA 2005).
• Treating the cost of installing or replacing equipment, such as a new heating system, as an ordinary utility bill. GOV.UK routes alterations to install or replace equipment to allowable expenses on the cash basis and to capital allowances under traditional accounting.

What to keep

• Utility bills for the business premises, showing the supplier, period and amount.
• Payment records.
• Where there is mixed business and private use, a written record of how the business proportion was worked out and the period reviewed.
• If you live at the premises and use the simplified expenses flat rate, a record of how many people live at your business premises over the year, which GOV.UK says to keep.

Real-world example

A ceramicist rents a studio unit on an industrial estate and uses it only for her business. Her annual electricity bill for the kiln and lighting is £2,400 and gas for heating is £900. GOV.UK lists utility bills among the premises costs a self-employed person can claim, and there is no private use to strip out, so both bills are deductible in full.

Frequently asked