A limited company director can legitimately claim working from home expenses through the company — reducing Corporation Tax with no Income Tax or NI consequences if done correctly. Here is exactly how each method works and which one suits most directors in 2026/27.
Three Methods for Claiming WFH Through Your Company
| Method | How it works | Weekly amount | Tax/NI on you? | P11D? |
|---|---|---|---|---|
| HMRC flat rate | Company pays £6/week — no calculation needed | £6 (£312/year) | No | No |
| Use-of-home calculation | Pro-rata actual household costs | Typically £10–£30/week | No | No |
| Formal licence/rent | Company pays you under a written agreement | Varies | Yes — property income | Possibly |
Most directors use the flat rate or the use-of-home calculation. Formal rent arrangements are rarely worth the complexity.
Method 1: HMRC Flat Rate — £6 Per Week
The simplest option. Your company pays you £6 per week (£312 per year) to cover the additional household costs of working from home. HMRC accepts this without receipts or calculation.
How to process it:
- Pass a director’s minute or board resolution approving the payment
- Pay £312 at year-end (or £26/month) via the company bank account
- Record it as a business expense in the company accounts
- No entry needed on the P11D; no Income Tax; no NI
Corporation Tax saving:
- At 25% main rate: £312 × 25% = £78/year
- At 19% small profits rate: £312 × 19% = £59.28/year
The relief is modest — but it is cost-free to implement.
Method 2: Use of Home as Office Calculation
A more detailed calculation of the actual proportion of household costs used for work. This typically produces a larger deduction.
How to calculate it:
- Count the number of rooms in your home (excluding bathrooms and hallways)
- Divide by the number of rooms used for work
- Calculate annual household costs: mortgage interest (or rent), council tax, utilities, broadband, buildings insurance
- Multiply by the room fraction and by the proportion of time the room is used for work
Example: David rents a 5-room flat. He uses one room as a dedicated home office, working from home 5 days a week (100% of working time). His annual household costs total £18,000.
- Room fraction: 1/5 = 20%
- Work time fraction: 5/5 days = 100%
- Business proportion: 20% × 100% = 20%
- Annual WFH claim: £18,000 × 20% = £3,600
David’s company pays him £3,600 per year. He pays no tax on it. The company deducts it as a business expense — saving £900 Corporation Tax at 25%.
Important caveat: If a room is used exclusively for business, there may be a Capital Gains Tax partial business use argument on the home’s eventual sale. Most people use a room for both work and personal use — this avoids any CGT complication while still supporting a proportionate WFH claim.
Key Figures 2026/27
| Amount | |
|---|---|
| HMRC WFH flat rate | £6/week (£312/year) |
| Corporation Tax main rate (profits > £250k) | 25% |
| Corporation Tax small profits rate (profits ≤ £50k) | 19% |
| P11D threshold for benefits | £0 — all reportable unless exempt |
| Tax-free threshold for reimbursed costs | Actual additional cost only |
Method 3: Formal Licence Fee or Rent
Under this approach, you and your company enter a formal licence-to-occupy agreement. The company pays you an agreed amount to use part of your home for business purposes.
Why it is rarely recommended:
- You pay Income Tax on the rent received (reported on SA105 Property pages)
- The rent does not count as earnings for pension contribution purposes
- The agreement must be at arm’s length and commercially justifiable
- Complications on mortgage terms (many residential mortgages prohibit commercial licences)
- Potential stamp duty or other implications on the property
In most cases, the use-of-home calculation produces a similar or larger deduction with none of these complications.
What Counts as an Eligible Home Working Cost
| Cost | Included in calculation? |
|---|---|
| Gas and electricity | Yes |
| Broadband (proportion used for work) | Yes |
| Rent or mortgage interest | Yes |
| Council tax | Yes |
| Buildings and contents insurance | Yes (proportionate) |
| Water rates | Rarely (not significantly affected by working from home) |
| Food and drink | No |
| Mortgage capital repayment | No — only interest |
Record Keeping
Keep a brief note of your calculation — either the flat rate basis or the use-of-home breakdown. HMRC does not require you to file this with your accounts, but you should be able to produce it if asked. A simple one-page spreadsheet showing rooms, costs, and fractions is sufficient.
See our limited company tax guide, PAYE expenses guide, and director salary and dividends guide.