Working from Home Tax Relief for Limited Companies: What You Can Claim

Working from Home Tax Relief for Limited Companies: What You Can Claim

If you run your limited company from home — even part of the time — you can claim a portion of your household costs as a business expense. This reduces your Corporation Tax bill.

Here's exactly what you can claim and how.

Two Methods: Flat Rate vs Actual Costs

Method 1: HMRC Flat Rate (Simplest)

HMRC allows a fixed monthly amount based on hours worked from home. No receipts needed.

Maximum claim: £26/month = £312 per year

Pros: Simple, no record-keeping, HMRC won't question it Cons: Low amount — actual costs are usually much higher

Method 2: Actual Costs (Higher Claims)

Calculate the real proportion of household costs used for business. This gives a much larger deduction but requires records.

Costs you can include:

• Mortgage interest or rent
• Council tax
• Electricity and gas
• Water rates
• Home insurance
• Internet and phone (business portion)
• Repairs and maintenance (of the business area)

How to calculate the proportion:

The most common methods:

1. Room-based: If you use 1 room of 5 exclusively for work = 20% of costs
2. Area-based: Business room is 12m² out of 80m² total = 15% of costs
3. Time-based: You work from home 3 days out of 5 = 60% of the room proportion

Example:

That's £1,944 vs £312 with the flat rate — over 6x more.

How to Claim Through Your Limited Company

There are two ways your company can pay you for home office costs:

Option A: Company Pays You Directly

Your company reimburses you for the business proportion of household costs. The payment is:

• Tax-free for you (it's reimbursement, not income)
• Allowable expense for the company (reduces Corporation Tax)
• Reported in your CT600 as part of business expenses

You need to keep records of the actual costs and the calculation method.

Option B: Formal Rental Agreement

You can charge your company rent for using part of your home. This is more formal:

1. Draft a simple licence agreement (company rents space from you)
2. Set a reasonable market rate rent
3. Company pays rent monthly — this is an allowable expense
4. You report the rent as property income on your personal tax return
5. You can deduct actual costs against the rental income

Warning: This can create Capital Gains Tax implications when you sell your home. The part used "exclusively for business" may lose the principal private residence relief. Most accountants recommend Option A to avoid this.

What About the Capital Gains Tax Trap?

If a room is used exclusively for business, HMRC may argue that portion of your home isn't your main residence. When you sell, that portion could be subject to Capital Gains Tax.

How to avoid this: Make sure the room has some personal use too. A desk in the spare bedroom that's also a guest room is fine. A fully converted garage used only as an office could be a problem.

Practical tip: Use the room for personal purposes occasionally and don't claim 100% of any room's costs. Claiming 80% of a room that's "mainly" for business is safer than 100% of a room that's "exclusively" for business.

Internet and Phone

Broadband

If you work from home, a portion of your broadband is a business expense. Common approach: claim 50% if you work from home full-time, or a lower proportion for part-time home working.

If you have a separate business broadband connection, claim 100% of that.

Mobile Phone

• Company contract in company name: 100% allowable (even if some personal use)
• Personal contract, company reimburses business calls: Only the business portion is allowable
• HMRC allows one mobile per employee as a tax-free benefit

Landline

Claim the business proportion of calls. The line rental itself is usually personal unless you have a dedicated business line.

Office Equipment and Furniture

Items bought for your home office are separate from the working-from-home allowance:

These are claimed separately through your company accounts, not through the working-from-home allowance.

See our complete guide to allowable expenses.

Record Keeping

To support your claim, keep:

1. Utility bills — at least one per year for each type
2. Calculation method — document how you arrived at the business percentage
3. Log of hours (if using flat rate method)
4. Any rental agreement (if using Option B)
5. Receipts for equipment and furniture

HMRC can ask for evidence if they enquire into your return. "I work from home sometimes" isn't enough — you need a reasonable, documented calculation.

Common Mistakes

Claiming Too Much

Be reasonable. If you use a small corner of the kitchen for 2 hours a day, claiming 25% of all household costs won't fly.

Double-Counting

If you claim the flat rate, you can't also claim actual costs for the same period. Choose one method per tax year.

Forgetting Council Tax

Many people claim utilities but forget council tax — it's usually one of the biggest claimable costs.

Not Claiming at All

The biggest mistake is not claiming anything. If you work from home, you're entitled to this relief. Even the flat rate gives you £312/year = about £59 in tax savings at the 19% small profits rate.

How Much Will You Save?

Your tax saving depends on your Corporation Tax rate:

The actual costs method can easily save enough to pay for your entire CT600 filing.

Include It in Your CT600

When you file your CT600, working-from-home costs are included in your business expenses. They reduce the profit figure in Box 155 and Box 165, which directly reduces your Corporation Tax.

Taxpipe makes this easy — enter your expenses and we calculate the tax automatically.

£59 per filing. No subscription. No jargon.

File your CT600 with Taxpipe →

Related Articles

• Corporation Tax Allowable Expenses — Complete List
• How to Reduce Corporation Tax Legally
• Capital Allowances for Small Companies
• Corporation Tax for Freelancers
• CT600 Box by Box Guide
• Pension Contributions & Corporation Tax Relief
• Employer NIC: Corporation Tax Deduction Guide
• Limited Company Expenses You Can Claim