Can I Claim Home Office Costs as a Business Expense?
Yes - you can claim a proportion of household costs or use the simplified £6/week rate.
What HMRC Says
If you work from home regularly, you can claim a proportion of household running costs, or use HMRC's flat rate.
When You Can Claim
- Proportion of rent/mortgage interest (not capital)
- Proportion of electricity, gas, water
- Proportion of council tax
- Proportion of home insurance
- Or the simplified £6/week (£312/year) flat rate
When You Cannot Claim
- Capital repayments on mortgage
- Full household bills if only partially used for work
- Costs of buying a house
Good to Know
How to calculate: Either: (Business room sq ft ÷ Total sq ft) × Annual costs, OR £6/week flat rate (simpler, less paperwork)
Understanding Home Office Costs Expenses
Working from home has become the norm for many company directors, and HMRC provides clear routes for claiming the associated costs. There are two main methods: the simplified flat rate and the proportional (actual cost) method. Choosing the right one can mean the difference between claiming £312 and claiming £2,500+ per year.
The simplified flat rate is £6 per week (£26 per month, £312 per year) for the 2025/26 tax year. Your company pays this to you as a tax-free reimbursement, and it is deductible for the company. No receipts or calculations are needed - you simply need to work from home regularly. The rate covers all household running costs (heating, electricity, broadband, etc.) in one lump sum. This is ideal for directors who want simplicity and minimal paperwork. However, for most directors paying typical household bills, the actual cost method yields a significantly higher claim.
The proportional method involves calculating the business use fraction of your household running costs. You need to determine what proportion of your home is used for business and for how long. The two common approaches are: (1) the room method - divide the area of your dedicated office by the total area of your home; or (2) the room count method - one room used for business out of, say, five total rooms gives you 20%. Apply this percentage to your eligible running costs: electricity, gas, water rates, council tax, home insurance, rent, mortgage interest (not capital repayments), and broadband.
A critical point that many directors miss: if you claim a proportion of mortgage interest or rent, you should be careful about the capital gains tax implications. If a room is used exclusively for business, it can affect your principal private residence relief when you sell your home. The standard advice is to ensure the room has some non-business use (even if it is just occasional personal use in the evenings) so that the entire property retains PPR relief. Discuss this with your accountant before making large claims.
For VAT-registered companies, you generally cannot reclaim VAT on household costs paid in your personal name. The company can reimburse you for the business proportion, and that reimbursement is deductible for the company, but the VAT element stays as a cost. If you rented a dedicated home office space with a bill in the company name, VAT recovery would be possible on that specific cost.
Remember that the flat rate and proportional method are mutually exclusive - you cannot claim both. You also cannot claim the flat rate on top of individual claims for broadband, electricity, etc. Choose one method and apply it consistently for the tax year.
Real-World Examples
Director using the proportional method
Sarah works from a dedicated home office that represents 15% of her home's floor area. Her annual household running costs are: electricity £1,200, gas £800, council tax £1,800, home insurance £400, and broadband £600. At 15%, she claims £720/year through her company. This is more than double the £312 flat rate.
Director using the flat rate for simplicity
Tom works from his kitchen table three days a week. He does not have a dedicated office and does not want to calculate proportions. His company pays him £6/week (£312/year) as a tax-free working from home allowance. No receipts needed, no calculations required. Simple and audit-proof.
High-value home office claim with rent
Emily rents a flat for £1,500/month and uses one room (20% of the floor area) as her dedicated office. She claims 20% of rent (£3,600/year), plus 20% of utilities and council tax. Her total home office claim exceeds £4,500/year. Since she rents rather than owns, there are no CGT implications.
Mortgage interest claim with CGT consideration
James owns his home with a mortgage. His interest-only payments are £800/month, and his office is 10% of the home. He could claim £960/year in mortgage interest. However, his accountant warns him that exclusive business use of the room could affect CGT relief on a future sale. James ensures the room is also used personally in the evenings to preserve PPR relief.
Common Mistakes to Avoid
- Using the flat rate when the proportional method would yield a much higher claim - always calculate both methods to see which is more beneficial
- Claiming a proportion of mortgage capital repayments instead of just the interest - only the interest element is an allowable cost, never the principal repayment
- Designating a room as exclusively for business without considering the CGT implications - exclusive business use can reduce your principal private residence relief on a future house sale
- Claiming both the flat rate and individual household bills - these are mutually exclusive methods, you must choose one or the other for the tax year
Frequently Asked Questions
How much can I claim for working from home through my limited company?
Using the flat rate, you can claim £6/week (£312/year) with no receipts needed. Using the proportional method, claims typically range from £1,000 to £3,000+ per year depending on your household costs and the proportion used for business. Calculate both methods and use whichever gives the higher figure.
Do I need a dedicated room to claim home office expenses?
No. You can claim under the flat rate even if you work from a kitchen table. For the proportional method, having a dedicated room makes the calculation simpler and more defensible, but you can still claim a proportion based on time and space even without a dedicated office.
Will claiming home office costs affect my capital gains tax on selling my home?
Potentially. If a room is used exclusively for business, that portion of the property may lose its principal private residence relief for CGT purposes. The standard advice is to ensure some personal use of the room (even occasional) to maintain full PPR relief. Always discuss this with your accountant before claiming significant amounts.
Can I claim home office costs if I also have a company office?
Yes, if you genuinely work from home regularly as well. Having a company office does not prevent you from claiming home office costs for the time you work from home. The claim should reflect the actual proportion of time and space used for business at home.
What bills can I include in my home office claim?
Eligible costs include electricity, gas, water rates, council tax, home insurance, mortgage interest (not capital), rent, and broadband. You apply your business use percentage to the total of all these costs. Decorating the office and office furniture are claimed separately as specific business expenses, not as part of the home office proportion.
Source: HMRC BIM47820 - Specific deductions: use of home: calculation of amounts
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