If you run a limited company and work from home, it’s important to understand what expenses you can claim to reduce your company’s corporation tax bill — and how to do it correctly.
HMRC allows several ways to claim for home office use, but the rules differ depending on how much you use your home for work and what expenses you incur.
In this guide, we outline the main methods used by limited company owners and important points to consider.
1. Claim HMRC’s flat rate expense (£6/week)
The simplest option is for a director to claim the HMRC flat rate, which is currently set at £6 per week (£312 per year).
No receipts or complex calculations needed
Meant to cover minor additional household expenses, such as heating and electricity
Ideal for directors who work from home occasionally or don’t want to track bills
From our experience, this is the most commonly claimed method by contractors.
If you work from home regularly, here are two other methods for claiming home working expenses; however, we recommend discussing your options with your accountant before proceeding.
2. Claim a proportion of household bills
If you work from home more extensively, your company can reimburse a proportion of actual household costs based on reasonable business use.
You can claim a percentage of:
Gas and electricity
Broadband (if used partly for business)
Water (if your business activities materially increase usage)
Home telephone (business calls only)
However, you can’t claim costs you incur anyway, which aren’t impacted by your business use of the property, including:
Rent or mortgage (unless there’s a formal rental agreement)
Council tax (for similar reasons)
Food, decor, or furniture (unless wholly for business use)
How to calculate the proportion of household bills:
Count the total number of rooms in your home.
Identify how many are used for business purposes.
Estimate the percentage of time those rooms are used for work.
Apply this percentage to any relevant household bills.
3. Set up a formal rental agreement
If you consistently use part of your property for business purposes, you might decide to charge your company rent for the privilege.
However, this requires a formal rental agreement and careful consideration.
Benefits
The company deducts rent as a business expense
You can potentially claim a fairer share of property-related costs
Drawbacks
Rent received must be declared on your Self-Assessment form.
You may need to pay income tax on that rent.
If a room is used exclusively for business, you risk affecting Capital Gains Tax (CGT) relief when selling your home.
Always speak to an accountant before setting up a rental agreement.
Important tax & legal considerations
Keep accurate records
Maintain receipts, calculations, and rationale for any claims made. HMRC may request evidence.
Don’t claim for ‘dual purpose’ items
Furniture, decor, or repairs used for business and personal use are generally not allowable. Only claim for wholly and exclusively business items.
Watch your potential exposure to CGT
In theory, it might be wise not to allocate any part of your home exclusively for business use. A small amount of private use helps preserve full Private Residence Relief.
Check insurance and mortgage T&Cs
Some home insurance and mortgage policies may restrict business use. If your business use is significant, you may need to inform providers.
Talk to a professional
If you want to claim home-working expenses above and beyond the fixed HMRC allowance, always talk to your accountant first.
