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)

Your company can pay you £6 per week as a tax-free homeworking allowance under ITEPA 2003 s316A. This applies to any director or employee who regularly works from home — there is no minimum hours threshold, and no receipts are needed.

Maximum claim: £6/week = £312 per year

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

Note: HMRC's simplified expenses guidance includes an hours-banded table (£10/£18/£26 per month). That table is for sole traders, not limited companies. For a company paying its director or employees, the applicable rate is a flat £6/week regardless of hours worked at home.

Method 2: Actual Additional Costs (Higher Claims)

You can claim the actual costs your household incurs because of working from home. The key word is additional — HMRC only allows costs that genuinely increase as a result of home working, not a straight proportionate share of all household bills.

Costs that qualify as additional:

Extra electricity and gas (heating and lighting the work area)
Internet (business proportion)
Metered water if genuinely increased
Repairs and maintenance of the business area

Costs that do NOT qualify as additional:

Mortgage interest or rent — these are fixed regardless of whether you work from home
Council tax — a fixed bill that does not change with home working
Home insurance — typically fixed

Fixed costs like mortgage interest, council tax, and insurance can only be accessed via a formal rental or licence arrangement — see Option B below.

How to calculate the proportion:

For additional costs (heating, electricity, internet), the most common methods are:

Room-based: If you use 1 room of 5 for work, apportion 20% of the variable running costs to that room
Area-based: Business room is 12m² out of 80m² total = 15% of variable costs
Time-based: You work from home 3 days out of 5 = 60% of the room proportion

Example — actual additional costs (Option A):

Expense	Annual Cost	Business %	Claimable
Electricity	£1,200	20%	£240
Gas (heating)	£900	20%	£180
Internet	£480	50%	£240
Total			£660

That's £660 vs £312 with the flat rate — more than double, with relatively little paperwork.

If you want to also claim against mortgage interest, council tax, and home insurance, you need to use the rental arrangement described in Option B below. In that scenario, the total claimable proportionate costs can be £1,500–2,000 or more, but those costs are offset against rental income on your personal tax return rather than being a direct company expense.

How to Claim Through Your Limited Company

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

Option A: Company Reimburses Additional Costs

Your company reimburses you for the additional household costs caused by working from home — extra heating, electricity, internet and so on. The payment is:

Tax-free for you to the extent it covers genuinely additional costs
Allowable expense for the company (reduces Corporation Tax)
Included in your company accounts as part of business expenses

Important: only costs that increase because of home working qualify for tax-free reimbursement. Fixed costs like mortgage interest, council tax, and home insurance do not change whether you work from home or not — they cannot be reimbursed tax-free through this route. Including them without a formal rental agreement would make the payment taxable earnings.

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 and allows you to offset all proportionate household costs — including fixed ones like mortgage interest and council tax — against your rental income on your personal tax return.

Draft a simple licence agreement (company rents a defined space from you)
Set a reasonable market rate rent
Company pays rent monthly — this is an allowable expense
You report the rent as property income on your personal Self Assessment tax return
You can deduct actual proportionate costs (including mortgage interest, council tax, insurance) 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:

Item	How to Claim	Notes
Desk	Capital allowance or expense if < £1,000	AIA gives 100% deduction
Office chair	Capital allowance or expense	Ergonomic chairs are fine
Monitor/screen	Capital allowance or expense
Printer	Capital allowance or expense	Plus ink/paper as consumables
Stationery	Revenue expense	Fully deductible
Software	Revenue expense (if subscription)	Or capital allowance if purchased

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:

Utility bills — at least one per year for each type
Calculation method — document how you arrived at the business percentage
Any rental agreement (if using Option B)
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.

Trying to Include Fixed Costs Without a Rental Agreement

Mortgage interest, council tax, and home insurance are fixed — they don't increase because you work from home. These can only be accessed via Option B (rental arrangement). Including them in a direct reimbursement claim (Option A) makes the excess payment taxable earnings, not a tax-free benefit.

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:

Annual WFH Claim	Tax Saving at 19%	Tax Saving at 25%
£312 (flat rate)	£59	£78
£660 (actual additional costs, Option A)	£125	£165
£1,500 (all proportionate costs, Option B)	£285	£375
£2,000 (all proportionate costs, Option B)	£380	£500

Note: for Option B figures, the company deducts the rent it pays, but you also receive rental income on your personal return — the net benefit depends on your personal tax position.

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.

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