Claiming home office expenses through your limited company is not a grey area — it is an explicitly allowable deduction under HMRC rules, provided the costs are incurred wholly and exclusively for business use. The question is not whether you can claim, but which method of calculation gives you the larger deduction for your specific setup.
- Flat rate: £6/week (£312/year) — no receipts, no CGT risk
- Apportioned method: potentially £1,000–£3,000+ for larger homes with high running costs
- Exclusive use of a room risks your CGT Private Residence Relief — dual use avoids this
- Flat rate requires at least 25 hours/month working from home
- Most directors are better off with the apportioned method — use the calculator to check
Two methods available to directors
HMRC allows two approaches for directors to claim home office costs through their limited company. You choose whichever gives the better outcome — you are not locked into one method permanently, and you can switch each year:
| Method | Amount | Receipts needed? | CGT risk? |
|---|---|---|---|
| HMRC flat rate | £6/week = £312/year | No | No |
| Apportioned actual costs | Depends on your home costs | Yes — running cost bills | Only if exclusive use |
Method 1: HMRC flat rate (£6/week)
HMRC's simplified method allows the company to reimburse £6 per week (£312 per year) as a home office expense — no documentation required beyond a claim record. To qualify, you must work from home for at least 25 hours per month.
| CT rate | Annual CT saving | Monthly saving |
|---|---|---|
| 19% (profits up to £50k) | £59.28 | £4.94 |
| 25% (profits above £250k) | £78.00 | £6.50 |
| 26.5% (marginal band) | £82.68 | £6.89 |
The saving is modest, but it requires virtually zero admin effort and carries no CGT risk whatsoever. For directors whose home costs are low, or who want simplicity above all else, the flat rate is the right choice.
Method 2: apportioned actual costs
The apportioned method calculates the proportion of your genuine home running costs attributable to business use. The standard formula:
Deductible amount = Total annual home costs × (Business rooms ÷ Total rooms)
Worked example: 5-bedroom house, 1 office room
| Cost category | Annual amount |
|---|---|
| Mortgage interest (not capital repayment) | £8,400 |
| Council tax | £2,400 |
| Gas and electricity | £2,800 |
| Broadband | £600 |
| Home insurance | £600 |
| Total home costs | £14,800 |
| Business rooms (1 of 6 rooms — excludes bathroom/kitchen) | 1/6 = 16.7% |
| Deductible amount | £2,467 |
| CT saving at 19% | £469 |
| CT saving at 25% | £617 |
Compare this to the flat rate saving of £59–£78. For most directors working from home in a reasonably sized property, the apportioned method is clearly superior.
The CGT risk — and how to avoid it
This is the most important risk to understand. If you use a room exclusively for business (it is never used for personal purposes), HMRC may treat that portion of your home as used for a trade. When you eventually sell your home, Private Residence Relief — which normally exempts all gain — may not apply to the business-use proportion, creating a capital gains tax liability.
However, if the room is used for both business and personal purposes (the desk also serves as a family computer station, the room is occasionally used for other purposes), exclusive business use does not exist and the CGT risk disappears. HMRC's own guidance confirms this.
Practical solution: Ensure your home office has a dual-use element — even if it is simply using the same desk for personal admin. The CGT risk from the apportioned method is largely theoretical for directors who genuinely use the space for multiple purposes. Document the dual-use nature if you want belt-and-braces protection.
What home costs can be included?
| Cost | Include? | Notes |
|---|---|---|
| Mortgage interest | Yes | Interest element only — not capital repayment |
| Rent | Yes | Full rental amount |
| Council tax | Yes | Full amount |
| Gas and electricity | Yes | Based on bills for the year |
| Broadband | Yes | If you don't have a separate business connection |
| Home insurance (buildings/contents) | Yes | Proportion attributable to the business room |
| Water rates | Marginal | HMRC rarely challenges inclusion |
| Mortgage capital repayment | No | Capital element is not a running cost |
| TV licence | No | Personal cost unless you genuinely use TV for work |
Using more than one room
If you genuinely use two rooms for business — for example, a home office and a separate studio — both rooms can be included in the numerator of your apportionment calculation. Two rooms out of six gives 2/6 (33%) rather than 1/6 (17%), nearly doubling the deductible amount. Be prepared to evidence that both rooms are genuinely used for business.
Hours-based alternative apportionment
HMRC also accepts an hours-based apportionment for some costs — particularly heating and lighting — where the business use proportion is calculated as business hours in the room ÷ total hours the room is used. This can give a higher or lower deduction than the rooms-based method depending on your working hours. Most directors find the rooms-based method simpler and sufficient.
Rented properties: If you rent your home, check your tenancy agreement. Some tenancy agreements prohibit commercial use. Working from home as a director of a service company is generally not considered a breach — but running a business from the property that involves clients visiting regularly, signage, or significant stock storage could be. Check with your landlord if in doubt.
Use the calculator
Frequently asked questions
Can I claim broadband as a home office cost?
What qualifies as 25 hours per month for the flat rate?
Can I claim more than one room?
Can I switch methods each year?
Does claiming home office affect my mortgage or insurance?
Important: This guide is for general information only and does not constitute tax or legal advice. Tax rules change — always verify current rates and thresholds with HMRC or a qualified accountant before making decisions.