Are coworking spaces tax deductible?

Here’s everything you need to know

If you’re a freelancer, contractor, digital nomad, or solopreneur in the UK, you might be wondering: are coworking spaces tax deductible? The short answer is: yes, but “it depends.”

In this article, we unpack the rules, explain what qualifies, show how coworking compares to home offices, walk through VAT implications and highlight who can and can’t claim. Always remember: every situation is different, so consult a tax professional before making claims.

What does tax deductible mean?

When we say an expense is “tax deductible,” we mean it can be subtracted from your business income, reducing your taxable profit (and thus your tax bill).

 

But HMRC only allows deductions for costs incurred “wholly and exclusively” for the purposes of your trade, profession or vocation (i.e. your business) (see HMRC’s Business Income Manual on “wholly and exclusively”). If an expense serves some personal purpose, HMRC may disallow part or all of it.

 

Hence, for coworking claims, your use must be genuinely business-focused, not a hybrid of leisure or personal work.

 

Also, coworking costs fall under the general category of office, property and equipment expenses (for self-employed people, for example) in HMRC’s guidance: you can claim “rent, rates, power and insurance costs” for business premises.

When freelancers, solopreneurs & contractors can deduct coworking costs

For sole traders / self-employed individuals

• You can include coworking membership or desk fees under your allowable business expenses in your Self Assessment return (under “office costs”).
• HMRC allows “rent for business premises” as an allowable cost for those who incur it (i.e. you do not need to own the building).
• You must satisfy the “wholly and exclusively” test: the coworking space must be used for business only, or you must apportion the cost if there is mixed use.
• If a coworking day or membership is used partly for non-business (e.g. personal projects), you should only claim the business proportion.
• If you use the space only occasionally and your main base is elsewhere (say, your home), you may still claim coworking days under “office costs” (and possibly travel).
• If coworking becomes your regular, predictable, full-time workspace, then travel to that space will be treated as commuting (i.e. non-deductible) (we cover this in the travel section). 

For limited companies, contractors operating via a company, or businesses

• If your business (a limited company) pays for coworking space, the cost is deductible for corporation tax, so it reduces your company’s taxable profits.
• The same “wholly and exclusively” rule applies: the coworking must be for business use and invoices should ideally be in the company’s name.
• The company must ensure the expense is reasonable (i.e. not excessive relative to business size) to avoid HMRC queries.
• If you, as a director or employee, use the coworking space, the company should directly pay for it; you cannot double-claim by also deducting it personally.
• In limited company scenarios, travel to coworking space may sometimes be reimbursed tax-free if the space qualifies as a “temporary workplace” (i.e. not a permanent office), subject to HMRC’s rules (including 24-month limits).

What coworking costs can you claim?

Item	What you can claim
Coworking membership/desk rental	The cost of monthly memberships or day-pass fees
Utilities & services (if charged separately)	Internet, electricity, printing, etc.
Meeting room or conference hire	If used for client meetings or business events
Extra services (mail, scanning, lockers)	As long as they directly facilitate your work
Office consumables and supplies	Stationery, printer paper, etc.
Equipment or furniture you bring in	If you purchase it for business use (may fall under capital allowances)
Business events/networking at coworking space	Fees for business seminars held there, etc.

 

Many coworking spaces bundle utilities, cleaning, internet, meeting room access, etc., into their membership fee. But if any of those services are charged separately, you can claim them provided they’re for business use.

A coworking provider often grants a licence to occupy a specific desk or area, which HMRC treats as effectively renting an office under a licence.

 

Coworking vs working from home: which is more tax-friendly?

Home office claims

If you work from home full-time or even a few days a week, HMRC lets you claim part of your household running costs as business expenses. That usually covers things like heating, electricity, internet and even a portion of your rent if you rent your property. You just need to make a reasonable estimate of how much of your home is used for work. For example, if your home has four rooms and one is a dedicated office, you could claim around a quarter of those relevant costs as business-related (gov.uk).

 

There’s also a simpler option for people who don’t want to calculate exact percentages. HMRC’s simplified expenses system lets you claim a flat monthly rate based on the number of hours you work from home each month. The current rate is:

 

• £10 a month if you work between 25 and 50 hours from home
• £18 a month for 51 to 100 hours
• £26 a month if you work over 101 hours

 

It’s a quick, no-math option, although it often works out less generous than calculating your actual costs, especially if your bills are high or you’ve set aside a full room for work.

Why coworking can be simpler and cleaner

Coworking spaces often make your tax life a lot easier. Instead of dividing up household bills or arguing that your spare room is “wholly and exclusively” for business, you have a clear invoice showing what you spent on workspace. It’s a straightforward business cost because it’s a fee paid purely for the purpose of working, and that’s exactly the kind of expense HMRC expects to see.

 

Coworking also avoids the problem of “mixed use.” When you work from home, it’s hard to prove you’re not using the same space for personal things, like watching TV or having dinner. In a coworking hub, the purpose is clear. You’re there to work, meet clients or collaborate – all activities that fall neatly under business use. That makes your record-keeping easier and your claims more defensible.

 

HMRC generally sees external workspace costs as legitimate, provided they’re reasonable and supported by receipts or invoices. As a bonus, coworking often helps separate your home and work life, which can make it easier to switch off at the end of the day, something that doesn’t come with a tax break, but is definitely a perk.

Avoiding double claims

You can claim both coworking and home office expenses within the same tax year, but not for the same hours or activities.

 

If your coworking hub is your main base, you’d claim those fees as your primary workspace cost. If you mostly work from home but occasionally use a coworking space, you can still claim your home office allowance for the time you work at home and your coworking fees for the time you spend there. The important part is that you don’t claim both for the same hours.

 

Travel to coworking: when is it allowable?

One of the trickiest questions around coworking expenses is whether you can claim the cost of getting there. The answer depends on how often you use the space and whether HMRC sees it as your main workplace or just an occasional one.

 

The commuting rule

Under HMRC’s commuting rule, travel between your home and your regular place of work counts as personal commuting, not business travel. That means you can’t claim for fuel, public transport, or parking if your coworking hub has effectively become your usual office. For example, if you head to the same space every weekday, HMRC treats those journeys in the same way as a 9-to-5 commute.

 

You can still deduct your coworking membership or desk fee as a business expense, but the travel costs themselves aren’t claimable.

 

When coworking is occasional

If you only use a coworking space from time to time, the rules shift a little. When your main base is your home or another office and you visit a coworking hub only occasionally, HMRC may class that hub as a temporary workplace.

 

In that case, you can usually claim your travel costs as business expenses. This includes things like:

• train fares to another city to meet a client
• mileage if you drive to a coworking site for a project day
• parking fees while attending meetings or events there 

According to FreeAgent, the key factor is purpose. If you’re using the coworking space for specific, time-limited business activities rather than as your ongoing base, travel is typically allowable.

 

For limited companies and directors

The same logic applies if you’re a company director or contractor working through a limited company. Your company can reimburse travel to a coworking space, provided it qualifies as a temporary workplace.

 

HMRC’s 24-month rule is what determines that. If you’ll work at a particular coworking site for less than 24 months and spend no more than around 40 percent of your total working time there, the location is still considered temporary. That means your travel costs can be reimbursed tax-free.

 

If you go beyond that threshold, the coworking space becomes your permanent workplace and travel to and from it becomes ordinary commuting, which isn’t deductible. 

 

What to keep in mind

Whether your travel is deductible comes down to how you use the coworking space. If it’s your regular office, travel isn’t claimable. If it’s an occasional base for client meetings or project work, it usually is. The best approach is to be honest about your routine and keep clear records of where and when you worked. That way, if HMRC ever asks, you can easily show that your claims are fair and accurate.

 

VAT on coworking spaces: what you can and can’t reclaim

VAT on coworking fees depends on three things: whether you’re VAT-registered, whether your coworking provider is VAT-registered and how you use the space.

When you can reclaim VAT

If both you and your coworking provider are VAT-registered, you can usually reclaim the VAT on your membership or desk fees. The expense must be wholly and exclusively for business use and you’ll need a valid VAT invoice showing the VAT amount.

 

In most cases, coworking spaces charge VAT because they’re supplying what HMRC calls a “licence to occupy”, which is a short-term rental of office space that’s classed as a taxable supply

When you need to split the claim

If you use the coworking space partly for personal reasons, you can only reclaim the business-use portion of the VAT. For example, if about 70% of your time there is business-related, you’d reclaim 70% of the VAT. HMRC’s guidance on private use makes it clear that VAT recovery must always be proportionate to business use.

When VAT can’t be reclaimed

Some coworking providers don’t charge VAT at all. That’s because certain types of commercial rent are VAT-exempt unless the landlord has chosen to “opt to tax” the property. If there’s no VAT on your invoice, there’s nothing to reclaim, though you can still deduct the full net cost as a business expense.

 

HMRC also blocks VAT recovery on any part of your coworking fee that relates to non-business perks, such as entertainment, catering or personal memberships.

In short, if both parties are VAT-registered and your coworking use is fully business-related, you can reclaim the VAT in full. If your use is mixed, claim a fair proportion. And if your provider doesn’t charge VAT, you can still claim the cost as an expense, just without any VAT recovery.

Who can’t claim coworking costs

Coworking spaces are a legitimate business expense for freelancers, contractors and companies, but not everyone can claim them. Whether you can depends on how you’re employed and how your income is taxed.

Employees

If you’re employed and paid through PAYE, you generally can’t claim tax relief on coworking fees you pay out of your own pocket. Even if you’re working remotely from a shared space, HMRC views that as a personal choice rather than a requirement of your job. The only possible exception is if your employer requires you to work in a specific location and you incur travel costs to get there, but in most cases, commuting rules mean you still won’t qualify for relief.

 

If your employer pays for a coworking membership on your behalf, that cost is treated as the company’s business expense, not yours personally. The tax benefit sits with the business, provided the space is used wholly for work purposes.

Casual or unregistered freelancers

If you’re earning a bit of side income from freelance work but haven’t officially registered as self-employed with HMRC, you can’t claim coworking costs either. HMRC only allows business expense deductions against business income. Until you’ve registered your self-employed status, there’s no mechanism to offset those expenses against your earnings.

Personal or hobby use

Finally, if you use a coworking space for non-business reasons, say, studying, writing a novel or just enjoying a change of scenery, you can’t claim those costs. HMRC is strict about expenses being wholly and exclusively for business. Any personal or hobby use should be excluded from your claim to avoid problems later on.

 

In short, coworking is only tax-deductible if you’re earning taxable business income and using the space entirely for work. Employees, hobbyists and side hustlers who haven’t registered with HMRC can enjoy the benefits of shared workspaces, but they’ll have to cover the cost themselves.

Are coworking spaces tax deductible?

Yes, coworking spaces can be tax deductible in the UK for freelancers, contractors, digital nomads and companies. But the deduction depends on satisfying HMRC’s tests around purpose, regularity and documentation.

 

Coworking offers a cleaner alternative to splitting household bills, but you must avoid mistakes like claiming travel that’s seen as commuting or claiming non-business use. VAT-registered entities may also reclaim VAT on coworking costs if properly invoiced and wholly for business use.

However, this article is for educational purposes: it’s not legal or tax advice. Every individual or business has its own circumstances and tax rules change. To ensure your claims are correct, always consult a qualified UK accountant or tax advisor before filing.