Recharging home working costs to your company
Overview 📘
As a company director, if you work from home regularly, you can recharge part of your household costs to your company. This allows the company to claim a corporation tax deduction, while you personally remain tax-neutral on the reimbursement.
In other words, you receive rent from your company for using your home as an office, but the rental “income” is offset by the equivalent costs of providing that space. The result is typically no taxable profit and no income tax to pay.
💡 Why This Is Tax Efficient
- It provides a tax-effective way for directors or founders to withdraw funds from their company.
- The company can claim a corporation tax deduction on the rent paid.
- The director usually incurs no personal tax, provided the rent charged is fair and supported by actual costs.
🏡 Calculating the Recharge
To calculate the appropriate amount, we’ll need details of your main household costs, apportioned by floorspace and time spent working from home.
If you rent your home, you can include a portion of your rent.
If you own your home, you cannot include mortgage repayments, as these are capital in nature.
Common Costs to Include
| Category | Eligible Costs |
|---|---|
| Rent | Only if you’re a tenant (not if you own your home) |
| Utilities | Heating, lighting, water, electricity |
| Council Tax | Proportionate share |
| Internet & Phone | Reasonable share of broadband and landline |
| Office Costs | Small repairs or equipment for your workspace |
You should also note:
- The number of rooms in your home, and how many are used for work.
- The average number of days per week you work from home.
- Whether the property is shared with others.
🧾 Simplified (Flat Rate) Method
HMRC allows the use of a flat rate of £6 per week (£26 per month) for home-working expenses without requiring receipts or detailed calculations.
However, this rate is very conservative and often not worthwhile for directors or business owners who work from home regularly. It’s best used only if:
- You work from home occasionally, or
- You don’t want to calculate and justify actual costs.
🔗 HMRC: Homeworking Rates and Allowances
🔗 Employee version of this guide: Expenses Employees Can Claim for Working from Home
📝 Key Points to Note
- Income below £1,000 per year: If total rental income from your company is less than £1,000, you don’t need to report it to HMRC or include it on your tax return.
- Rental Agreement: Ideally, you should have a written agreement between you and your company. Barnes & Scott can help you prepare this.
- Non-exclusive use: The agreement must state that the workspace is not used exclusively for business to avoid potential Capital Gains Tax issues when selling your home.
- Commercial value: The rent charged should reflect market value and remain “arm’s length”. For example, the cost should not exceed that of a modest co-working desk (roughly £450-£550 per month).
- Homeowners: As mortgage costs cannot be included, total rent recharged by homeowners is typically much lower, often capped at £1,000 per year in line with HMRC’s threshold.
📊 Example Calculation
| Cost Category | Monthly Amount | % Attributable to Work | Rechargeable Amount |
|---|---|---|---|
| Rent | £1,800 | 15% | £270 |
| Utilities | £180 | 15% | £27 |
| Council Tax | £180 | 15% | £27 |
| Internet | £40 | 15% | £6 |
| Total Rechargeable to Company | £330 per month |
💡 The recharge should reflect a realistic, fair market rate.
🧮 How to Calculate Your Own Costs
To simplify the process, you can complete our internal form to calculate your home-working cost and suggested recharge.
🔗 Barnes & Scott Home Working Cost Calculator
✅ Summary
- You can recharge part of your household costs to your company for working from home.
- The company receives a corporation tax deduction, and you usually pay no personal tax.
- Keep the rent at a realistic, fair value and record it with a written agreement.
- Use the flat rate (£6 per week) only if you work from home occasionally.