Do You Need a Business Energy Tariff Working From Home? (I Don't)

Quick answer: if you work from an ordinary home on a domestic meter, you do not need a business energy tariff. You stay on a residential tariff, and that is what your supplier expects. A business contract is not a better version of a home contract. It sits outside the Ofgem price cap, it usually locks you in for one to five years, and it can move you from 5% VAT to 20%. Only premises genuinely metered and billed as non-domestic belong on one.

I get asked this often enough by other founders that it is worth writing down properly, because the pages ranking for it are mostly written by energy brokers who earn a commission when you sign a business contract.

My own position

I run Glide Marketing from a home office in Essex. It is a limited company. I am its director. The work is desk-based: a laptop, a couple of monitors, a desk that goes up and down, and far too much coffee.

The house is on a residential Octopus Energy tariff, the Flexible one, with a smart meter. It has been for about two years. I have never moved it to a business contract and I have never had a reason to. If you want the longer version of how that supplier has behaved over those two years, I wrote an honest Octopus Energy review.

One thing I should be straight about: I am not an Octopus business energy customer. Nothing below is a first-hand account of anyone's business energy service. What follows is the sorting rule, the trade-offs, and the tax and VAT points, which is what the question is really about.

The rule that decides it

Forget your employment status for a moment. Sole trader, director, employee, none of it decides this on its own.

The question is what the premises is. Energy supply follows the building and its meter, not the person sitting in it. A house with a domestic meter, used mainly as a home, is supplied on a domestic tariff. Premises metered and billed as non-domestic go on a business contract.

That is why a spare-room office does not change anything. The building is still a home. You have added a laptop to a property that already runs a fridge, a boiler, a washing machine and a shower.

Suppliers apply a rough test when someone asks to put a home address on a commercial contract: they want business use to be at least half of the energy used in the property, and they want evidence the business exists and is run from there. Most home-based businesses fall a long way short of that first bar. A monitor and a laptop drawing power for eight hours a day is a small fraction of what a household gets through.

A business tariff is not an upgrade

This is the part the broker-written pages skip, so it is worth being blunt about. Moving a home supply onto a business contract costs you four things.

You lose the price cap. Ofgem's cap applies to domestic customers. Business energy sits outside it entirely. Your rate is whatever you agreed on the day you agreed it, and two identical businesses can pay very different prices depending on when they signed.

You usually lose the right to leave. Domestic switching is quick and free, and a domestic switch comes with a 14-day cooling-off period. Business contracts are typically fixed for one to five years and are binding once agreed, including when they are agreed over the phone. Micro-business contracts carry more protection than larger ones, and Ofgem tightened those rules in 2025, but "more protection" is not the same as the domestic position.

You can lose the VAT rate. Domestic energy is charged at the reduced 5% rate. Business energy defaults to 20%. There are routes back down, covered below, but the default moves against you.

You lose it for the whole house. A property has one supply. You cannot put the office on a business contract and leave the kitchen on a domestic one. Everyone else living there loses the same protections you do.

Set against that, you might get a lower unit rate. For a business that uses a lot of energy, that trade can be worth it. For a person with a laptop in a spare room, it is a bad deal wearing a suit.

The VAT point, which is the one worth knowing

If you do end up on a business supply, VAT is where a home-based business usually lands back on 5% anyway.

HMRC treats small supplies as domestic automatically, whoever the customer is. These are the de minimis limits, and a supply at or below them is charged at the reduced rate with no certificate needed:

Separately, there is the mixed-use rule. Where a supply goes to premises with both domestic and business use, and at least 60% of it is for qualifying domestic use, the whole supply is charged at the reduced rate. A house with an office in it is the textbook case.

The rules live in HMRC VAT Notice 701/19, and it is your supplier that applies them to the bill. Two consequences follow. First, a broker quoting you a business rate "plus VAT" may be quoting 20% on a supply that should be at 5%. Second, if you are below the de minimis limits, a large part of the headline saving on the unit rate has already been handed back at the till.

Premises that qualify for the reduced VAT rate are also outside the Climate Change Levy, which is another line that appears on business bills and not on domestic ones.

When a home-based business genuinely does need a business tariff

There are real cases. They are just narrower than the ranking pages suggest.

• The property, or a self-contained part of it, has been converted and has its own non-domestic meter.
• You run something energy-hungry from the building: a workshop, a kiln, commercial refrigeration, salon equipment, a bank of machines.
• The business use is genuinely the majority of what the building consumes.
• You rent separate premises alongside the home office. That supply is a business supply regardless of what your house is on.

Charging an electric vehicle on the drive does not put you in this group, whatever your mileage is. That is a domestic supply with an EV tariff question attached to it, which is a different conversation.

What you can claim, which is the question underneath the question

Most people asking about business energy at home are really asking how to get the cost of the office into the accounts. You do not need a business tariff for that. You need a defensible proportion.

If you are a sole trader or in a partnership, HMRC's simplified expenses let you skip the apportionment sum entirely and use a flat monthly rate based on hours worked from home:

That caps out at £312 a year. If your real apportioned costs are higher, you can work out the split by rooms and hours instead and claim that, provided you can show your working.

Limited companies cannot use simplified expenses. The position for company directors changed on 6 April 2026, when the flat-rate homeworking deduction employees used to claim was withdrawn. What an employer can pay towards homeworking costs, and what an employee can claim, are two different mechanisms that get talked about as if they were one. That distinction is exactly where people get it wrong, so take it to your accountant with your own numbers rather than lifting a figure from a guide.

Business rates, briefly

This comes up in the same breath and is worth separating out.

Business rates on a home usually arise only where a distinct part of the property is used exclusively for the business: a converted workshop, a room with its own entrance, a space clients come to. A spare bedroom that is a study on weekdays and a spare bedroom at Christmas is normally left inside your council tax band.

The Valuation Office Agency makes that call. Your energy supplier has no part in it, and being on a domestic tariff does not protect you from it either way. They are two unconnected questions that happen to arrive together.

The people you should tell

Your energy supplier is generally not on this list for ordinary desk work. These usually are:

• Your home insurer. Business equipment and business use often need declaring, and cover for a work laptop is not automatic. I went through what applies to a home-based business in this guide to freelancer insurance.
• Your mortgage lender or landlord. Most tenancy agreements and some mortgage terms say something about running a business from the property. Usually it is a formality, occasionally it is not.
• Your local council, if the use of the building materially changes. Converting a garage into a treatment room is a different thing from putting a desk in a bedroom.

Which referral applies if you switch

Since I write about the Octopus referral scheme and this question lands next to it: judge it by the account, not by your employment status.

A normal domestic account at your house is a household switch, so the home referral applies and pays £50 each way. That is the one that fits nearly every home-based business, mine included. Where the account is genuinely an Octopus business energy account for non-domestic premises, the business referral pays £75 each way instead. The same personal link covers both, and I have written up how the scheme pays out if you want the mechanics.

Do not move a domestic account onto a business contract to chase the larger referral. You would be trading the price cap and your switching rights for £25.

The short version

If you work from a normal home on a domestic meter, stay where you are. Get your energy cost into the accounts through a proportion or a flat rate, keep the price cap, keep the right to switch, and keep the 5% VAT.

Look at a business contract when the building changes, not when your job title does.

Mike McDonnell, Founder of Glide Marketing