For many owner-managed companies, the kitchen table, spare room or garden office is where the working day actually happens. So, can directors claim homeworking costs? Usually, yes – but the right route depends on whether the company pays an allowance, reimburses genuine additional costs, or has a formal arrangement to use part of the director’s home.
The simplest option is often enough. A more ambitious claim can be worthwhile where costs are genuinely higher, but it needs sound evidence and can create avoidable tax consequences if handled casually. The aim is not to claim every household bill. It is to make sure the company receives relief for legitimate business costs while the director stays on the right side of HMRC rules.
The straightforward option: £6 per week
A limited company can pay a director who regularly works from home a tax-free homeworking allowance of up to £6 per week, or £26 per month. This can normally be paid without the director producing utility bills or calculating the precise extra cost of heating, electricity and water.
Provided there are genuine homeworking arrangements and the director regularly works at home, the payment is usually exempt from Income Tax and National Insurance. The company can generally deduct it when calculating its taxable profit too. For a director who works from home every week, it is a simple, low-admin way to recognise the additional household costs created by work.
It is worth documenting the arrangement in a board minute, employment terms or a short written policy. It does not need to be complicated. A note confirming that the director works from home regularly and may receive the allowance gives the company a clear audit trail.
The £6 figure is an allowance, not an automatic entitlement for every person on the payroll. It should reflect a real working arrangement. A director who very occasionally answers emails from home while mainly working elsewhere would have a weaker case than one who runs the company administration, client calls and planning from a home office several days a week.
Can directors claim homeworking costs above £6?
Yes, but the company should only reimburse the director’s actual additional household expenses that arise because of their work. This is where the distinction between an easy allowance and a detailed claim matters.
If working from home means extra electricity, gas, metered water, business telephone calls or a new broadband connection is required specifically for the role, the additional business element may be reimbursed. The key word is additional. HMRC is not generally interested in the full cost of a household service that would have been paid anyway.
For example, a director may be able to show that the home office needs heating and lighting for long working hours, increasing household energy use. A reasonable calculation could compare bills over a similar period, account for the number of rooms and working hours, and support the extra amount with invoices. The company can reimburse that calculated additional cost rather than relying on the flat-rate allowance.
However, an existing broadband contract is often difficult to claim in full. If the household already had broadband for personal use, the cost has not necessarily increased simply because the director uses it for work. A separate business line, an upgrade needed solely for business purposes, or identifiable business call costs may be easier to justify.
Avoid simply dividing every household bill by the number of rooms and charging that amount to the company. A proportion may feel fair, but tax relief depends on the actual additional cost caused by work, not on a convenient formula. Where the figures are modest, the £6 weekly allowance is usually the more practical and lower-risk approach.
Keep evidence proportionate to the claim
A larger reimbursement should be backed by a sensible calculation and retained records. In practice, keep copies of the relevant bills, a note explaining the method used, the period covered and evidence of payment by the company.
The calculation does not need to be excessively technical, but it must be credible. A claim for £300 a year may need only a brief, well-reasoned calculation. A much larger annual amount deserves more detailed support, especially if it is based on a dedicated office with substantial energy use.
What directors usually cannot claim
A director cannot usually ask the company to pay ordinary personal living costs just because the home is used for business. Mortgage capital repayments, the full rent on a home, council tax and general household insurance are not normally allowable homeworking expenses.
Mortgage interest and rent are also areas where people can overclaim. There may be more specialised arrangements involving the company renting workspace from the director, but this is not the same as a standard homeworking expense claim. It can move income from the company to the director personally and may bring reporting, tax and capital gains considerations.
Furniture and equipment are different. A company can often buy business equipment such as a laptop, monitor, desk, office chair or printer directly where it is needed for the company’s work. The company should own the item, retain the receipt and consider whether there is significant private use. Equipment that is mainly for business is generally much cleaner than trying to claim a share of household bills.
Claiming through the company versus claiming personally
Directors of limited companies often wear two hats: they are both company officers and employees. That can cause confusion about where a claim should be made.
Where the company reimburses an eligible homeworking cost, it is usually dealt with through the company’s records. It should not normally be claimed again on the director’s Self Assessment return. Double claiming is an obvious problem and is easily avoided by keeping the company bookkeeping clear.
A personal employment-expense claim is more restrictive. Broadly, the expense must be incurred wholly, exclusively and necessarily in performing the duties of the role. For homeworking, the director would generally need to be required to work from home, rather than simply prefer it for convenience. This is why the company-paid allowance or reimbursement is often the most appropriate route for owner-managed businesses.
Sole traders operate under different rules. They can claim a reasonable business proportion of certain home costs, or use simplified expenses, through their self-employment accounts. That does not automatically apply to a director of a limited company, because the company is a separate legal entity.
Be cautious with rent paid by the company
A formal rental agreement can appear attractive where a director has a dedicated office at home. The company pays rent for the space and receives a corporation tax deduction. But the rent is normally taxable income for the director personally, and the director may only deduct an appropriate share of related property costs.
There can also be capital gains tax implications if part of the home is used exclusively for business. Principal Private Residence Relief is often available when a home is sold, but exclusive business use can restrict relief for the affected area. The facts matter, including whether the room has any domestic use and how the agreement is written.
Business rates, insurance permissions and mortgage conditions may also need checking. For most directors, a rental arrangement is only worth considering where there is a material, well-supported commercial reason – not simply because the £6 weekly allowance feels too small.
Practical bookkeeping for owner-managed companies
Good records turn a legitimate claim into a straightforward one. The payment should be recorded as a homeworking expense or staff cost in the accounts, not mixed into drawings or unexplained director’s loan account movements.
For the flat-rate amount, retain the written arrangement and a record of the payments. For actual-cost reimbursements, retain bills, the calculation and any expense claim form or director approval. If the company pays household bills directly, take extra care: the personal and business split must be clear, and any private benefit needs to be considered.
VAT is another area where assumptions can be costly. There is no automatic right for a company to reclaim VAT on a director’s domestic utility bills. The contractual position, VAT invoice and genuine business use all matter. It is sensible to check the detail before including any VAT in a claim.
A modest homeworking payment is rarely the biggest tax-saving decision in a company, but it is part of running the business properly. When it sits alongside sensible salary and dividend planning, allowable expenses, accurate bookkeeping and regular profit reviews, small decisions can support stronger cashflow and fewer surprises.
If you work regularly from home, make the arrangement clear, choose a method that matches the evidence available and review it as the business grows. A short conversation before setting up a rent agreement or larger recurring claim can protect both the company’s tax position and your personal finances.