Recharging home working costs to your company

Note: from April 2020 this note only applies to you if you rent your property. If you are a homeowner it is no longer efficient for you to claim this deduction, see here for how you should claim your home working expenses.

If you spend a significant amount of time working from home you are able to recharge some of the costs you incur by working from home to your company. This will be considered as rental income to you personally, but it will be off-set by the cost of providing the space to your company. 

We do this as it’s a tax-saving measure, because it is a tax-effective way of being paid from the company. The company also receives a corporation tax deduction on the rental costs paid to you.

In order to calculate this we need to know the main costs in providing the office space, apportioned by space and time spent working from home. 

Simplified method (flat rate)

You can use a simplified method which is capped at £6 per week for which you do not need to provide any documentation. This can sometimes be the preferred method if the costs from above are low enough (around £200 per year). 

Key points to note

  • The income earned from renting the space to your company will need to be declared on your self-assessment return. There could be a small amount of tax to pay, but it would be less than if you extracted the money as salary or dividends.
  • We will need to draft a rental agreement between yourself and the company which will need to be signed and held on file.
    • If the property is owned by yourself, the rental agreement needs to be on a non-exclusive basis to prevent any capital gains tax issues from arising later.
  • The amount calculated should be realistic in terms of commercial value, and should be kept at an ‘arm’s length’ basis, meaning that both parties should benefit from the arrangement. For example, a typical co-working desk in London is priced at around £350-£400 per month; so the end result should not be more than this amount as it would not reflect a fair commercial transaction. 

Aspects to consider

a) The monthly rent.

b) Average cost of utility bills each month.

c) Council tax.

d) Internet/home broadband/landline.

e) Any other relevant costs related to working from home, e.g. creating a home office, shelving etc. 

f) The number of main rooms in your home (how many bedrooms, kitchens and receptions are there; and how many rooms do you use for work)? 

h) The number of days per week you spend working from home on average.

i) Is the property shared?

Calculation of cost

You can fill out our form here to calculate the cost of working from home.

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