Property & Use of Home · 2026/27
Home Workshops and Storage: Claim Tax Relief Without Risking CGT
Many CIS subcontractors leave hundreds of pounds on the table every year by ignoring the garage or workshop they use for the business. Others claim incorrectly and unknowingly create a Capital Gains Tax problem for when they sell their home. Here is how to get it right.
Your garage is full of tools. You spend evenings in there cutting materials, charging batteries, sorting your kit for the next day. You heat it in winter, you run power to it all year round. Every penny of that running cost is a legitimate business expense — and most subcontractors never claim a single one. The reason? Either they don't know they can, or they've heard the words "Capital Gains Tax" and backed away from the whole thing. This guide explains both sides: how to claim what you're owed, and the one rule that keeps your home fully protected when you sell.
Two Ways to Claim — and Why One Pays Nearly Four Times More
HMRC gives you two methods for claiming home workspace costs. One is simple and quick. The other takes a bit more work but reflects what you actually spend — and for a subcontractor running equipment from home, the difference is significant.
Method 1 — Simplified Flat Rate
A fixed monthly amount based purely on how many hours per month you work from home on business tasks. No receipts, no calculations — just pick your tier and claim it.
Fast and simple — but the cap of £312 per year severely undervalues any workshop with real heating, power, and storage costs.
Method 2 — Actual Costs (Proportionate)
You add up your total household running costs and calculate the proportion that relates to your business space — based on floor area and how much time it's used for work.
- Bills you can include: Mortgage interest (not capital repayment), Council Tax, electricity, gas, broadband, and buildings insurance.
- Why it matters for trades: Running a compressor, heating a garage through winter, and charging power tools all day pushes actual costs well above any flat rate.
- What you need: 12 months of utility bills, a floor area measurement, and a rough record of hours used for business tasks.
The Capital Gains Tax Risk — and How to Avoid It Completely
Your main home is normally 100% exempt from Capital Gains Tax when you sell, protected by something called Private Residence Relief (PRR). This is the tax-free status that means most homeowners pay nothing on the profit when they move house. It is extremely valuable — and there is one specific way a home workspace claim can accidentally put it at risk.
If you claim that your garage or workshop is used exclusively for business — with zero domestic use whatsoever — HMRC treats that square footage as a business asset, not a home asset. Private Residence Relief does not apply to business assets. When you sell the property, a proportional slice of the profit on your home becomes subject to Capital Gains Tax. The fix is simple — but only if you know about it before you file.
Storing a lawnmower, a family bicycle, or any ordinary household item inside the workshop means the space is genuinely mixed-use — not exclusively business. That single fact protects your full Private Residence Relief. You still claim the business proportion of running costs. You just cannot claim it is 100% business-only.
Never submit accounts or sign a document stating that a room or outbuilding is 100% dedicated to your trade. One dual-use item prevents HMRC from applying Capital Gains Tax to that space when you sell.
CIS Tax Insights · 2026The Numbers: Flat Rate vs. Actual Costs — A Real Example
Here is what the two methods look like for a subcontractor with a large garage workshop taking up 18% of the home's total floor area, used roughly 70% of the time for business work. Total annual household bills: £9,600.
| Step 1: Floor area proportion (18% of £9,600) | £1,728 |
| Step 2: Business use adjustment (70% of £1,728) | £1,210/yr |
| Flat rate scheme — maximum possible claim | £312/yr |
| Extra tax relief left on the table by using flat rate | +£898/yr |
| Legitimate actual cost claim (CGT-safe with dual use) | £1,210/yr |
That £898 gap is real money — and it repeats every year. Over five years, the difference between the two methods in this example is over £4,000 in unclaimed tax relief. The actual cost method requires a bit more paperwork, but for any subcontractor running a real workshop, the numbers justify the effort.
Four Steps to Claim Correctly — Starting This Week
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Measure Your Workshop or Garage Floor Area Measure the length and width of your workshop or storage space, then calculate it as a percentage of your total home floor area. Include all rooms when calculating the total — hallways, bathrooms, everything. Write this figure down and keep it with your business records. This is your base fraction for all cost calculations. 💡 Take a photo of your measurement — it serves as a record if HMRC ever asks how you arrived at the figure.
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Keep a Simple Log of Business Use Hours You do not need a timesheet — a rough weekly note works. How many evenings did you use the workshop? How many hours on weekend prep? This log supports your business use percentage and gives your accountant solid footing when calculating the proportionate claim. A notes app on your phone is enough.
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Put One Non-Business Item in the Space — and Keep It There A lawnmower, a bike, a bag of compost, a spare tyre. Something that is clearly not part of your trade. This establishes genuine mixed use and protects your Private Residence Relief when you sell. Do not remove it. Do not describe the space as "exclusively business" in any document, application, or tax return. ⚠ This is the single most important step in the entire process — it costs nothing and prevents a significant CGT exposure.
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Collect 12 Months of Household Bills Gather your electricity, gas, broadband, buildings insurance, Council Tax, and mortgage interest statements for the full tax year. If your bills spike in winter because you're heating the workshop, those higher costs will be captured accurately — something the flat rate never reflects. Digital copies are fine; keep them for at least five years.
Frequently Asked Questions
For most subcontractors with a working garage or workshop, actual costs will significantly outperform the flat rate. The flat rate is capped at £312 per year regardless of what you actually spend. If your household bills are typical and your workshop takes up a reasonable proportion of your home, actual costs will almost always be higher. The flat rate makes sense only if your business use of home is genuinely minimal — occasional paperwork only, no equipment storage, no power tools running.
Yes — and this is the key point. Mixed use does not disqualify you from claiming. You claim the business proportion of the space's running costs, based on floor area and hours of business use. The lawnmower simply ensures the space does not meet the "exclusively business" threshold that would remove Private Residence Relief. You get the tax relief on the business costs and you keep your home's CGT exemption. Both outcomes at once.
There is no formal notification required. You simply include the home workspace claim on your Self Assessment return as an allowable business expense. Your records — floor area calculation, usage log, and household bills — are the supporting evidence if HMRC ever queries the figure. Keep them for at least five years after the relevant tax return's filing deadline.
The Money Is Already There — You Just Have to Claim It
Your workshop, your garage, your storage space — HMRC has always allowed you to claim a fair portion of what it costs to run them. Most subcontractors simply never do. Now you know the method, the numbers, and the one rule that keeps your home's tax-free status fully intact.
Spend twenty minutes this week measuring the space and pulling your last twelve months of bills together. If the actual cost calculation comes out significantly higher than £312, switch to the proportionate method. Keep a non-business item in the space. Document everything. It is a straightforward claim that pays the same return every single year.
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Every Legitimate Claim Starts With Clean Records.
From workshop expenses to CIS deductions — the more organised your documentation, the more you recover. Start with your CIS refund position and compliant invoices.
This article is for informational purposes only and does not constitute formal legal, financial, or property tax advice. Capital Gains Tax and Private Residence Relief guidelines are subject to strict fact-specific interpretations. Always consult a qualified accountant before submitting home workspace claims. Based on 2026/27 HMRC guidelines.