Using your home as an office: what your company can pay you
The rules changed in April 2026 and most owners have not noticed. If the money does not come out of the company, there is no claim at all now. Here is the route we put most owner-managed companies on, and the one we tell them to leave alone.
Using your home as an office is ordinary now for almost every owner we work with. Quotes get priced at the kitchen table on a Sunday night, payroll gets run from the spare room, and the director is at home two or three days a week between sites, salon shifts or client meetings.
The question that follows is always the same. Can the company pay something towards the house for that. It can, and the rules shifted on 6 April 2026 in a way that catches people out. Employees can no longer claim these costs back on their own tax return, so if the company pays nothing, nothing comes back.
Our view, after seeing this across construction companies, garages, salons and agencies, is that most owners should take the simple route, keep the room multi-purpose, and leave the rental agreement alone unless the figures genuinely justify it.
What changed on 6 April 2026
Until this April, an employee or director who worked from home and paid the extra household costs themselves could claim a deduction on their tax return. That route has gone. From 6 April 2026, non-reimbursed household expenses are no longer deductible, and HMRC was open about why: it found that over half of the claims being made were not eligible in the first place.
What survives is the employer side. A company can still reimburse a director or an employee for the reasonable additional costs of working at home, free of income tax and National Insurance. HMRC sets out the employer position on its homeworking expenses and benefits page.
So the practical effect for an owner-managed company is a change of direction rather than a loss. The claim now has to be made by the company, paid to you, and recorded in the books. If your accountant has never mentioned it, the money has been sitting in the house unclaimed, and it will stay there unless somebody sets the payment up.
The flat rate suits most directors
The company can pay you £6 a week, £312 across a full year, for using your home as an office. No receipts, no spreadsheet, no argument about which room counts. It is free of income tax and National Insurance in your hands, and it comes off the company’s profit before corporation tax is worked out.
The condition is that there is a genuine homeworking arrangement and that you actually carry out real duties of the job at home. Pricing jobs, chasing suppliers, running payroll and doing the books all count. Opening an email on the sofa on a Saturday does not.
We set this up as a standing monthly payment with the rest of the payroll run, so it happens whether anyone remembers it or not. That is the whole appeal. It is small, it is certain, it costs nothing to administer, and it never turns into a conversation with HMRC about floor areas three years later.
For an owner who is out on site or in the salon most of the week and home for the admin, this is almost always where the conversation should end.
The rental agreement gets talked about far more than it gets used. For most owners it moves money from one pocket to the other, adds paperwork, and puts a slice of the house in play.
When working out actual costs pays
The alternative is to work out what home working genuinely adds to the household bills and have the company reimburse that. The costs in play are the variable ones: heating, electricity, water where it is metered, and broadband used for the business. You take the proportion of the house the work space represents, then the proportion of the week it is used for work, and you apply both.
Fixed costs stay out. Rent, mortgage interest, council tax and buildings insurance are the same whether you work at home or not, so HMRC does not accept them as additional costs under this method.
Once you apportion time honestly, part-time home working rarely beats the flat rate. A director who is genuinely based at home most of the week, in a house with real running costs, often clears it comfortably. The test is arithmetic rather than opinion, which is why we run the calculation once, write it down, and keep the workings with the records. A claim without a calculation behind it is the kind of thing that unravels badly if HMRC asks.
Renting a room to your own company
The third route is a formal licence or rental agreement. You rent part of your home to the company at a commercial rate, the company deducts the rent, and a share of fixed costs including mortgage interest and council tax can be set against the rental income. The rent is personal property income, so it goes on your Self Assessment return.
It is talked about far more than it is used, and there are reasons for that. The rent has to reflect what a small office nearby would actually cost, so the figure is not yours to pick. Money moves from the company to you and then gets taxed personally, which narrows the benefit considerably once you look at it properly.
Then there is the house itself. If a room is used exclusively for business, a slice of the gain on your home can fall outside Private Residence Relief when you sell, and an exclusively used office can attract a separate business rates assessment. Keeping the room multi-purpose, with a sofa bed or the family desk in it, protects the relief on the whole property.
We look at this route when the home is the main place of business and the numbers are substantial. Otherwise it adds paperwork and risk for very little.
Desks, broadband and the phone bill
Separate from the use of home claim, the company can buy the equipment you work on. A desk, a chair, a laptop, a second screen, a printer. These are company assets, bought in the company’s name, and they are dealt with under capital allowances. Buy something with significant private use and the company should not be picking up the whole bill, because the private share turns into a benefit in kind on you.
Phone and broadband follow the contract. If the contract is in the company’s name, the company can pay it. If it is in your personal name, only the business share belongs in the accounts, which usually means it is cleaner to move the mobile contract across than to argue about percentages every quarter.
If the company is VAT registered, VAT on the business proportion of mixed-use costs can be recovered where the records support it. Building work on the house is a different matter and rarely recoverable, so speak to us before anyone starts converting the garage.
Travel is the other expense that gets muddled once home becomes the base. We cover that in claiming travel expenses.
Common questions
Can my company still pay me for working from home after April 2026?
Yes. The April 2026 change removed the deduction employees could claim on their own tax return for costs nobody reimbursed. The employer side is untouched, so a company can still reimburse a director for the reasonable additional costs of working at home, free of income tax and National Insurance, provided there is a genuine homeworking arrangement.
Do I need receipts for the £6 a week flat rate?
No. That is the point of it. The flat rate is paid without receipts or a calculation, as long as you genuinely carry out work duties at home. Keep a short note of the arrangement and run the payment through the books each month. If you want to claim more than the flat rate, you then do need the workings and the bills behind them.
Will a home office affect Capital Gains Tax when I sell the house?
Only if part of the property is used exclusively for business. In that case a share of the gain can fall outside Private Residence Relief, apportioned by floor area or room count. Where the room has mixed use, a study that doubles as a guest room for example, the relief on the whole property is preserved. Most directors keep the space multi-purpose for exactly this reason.
Is a rental agreement with my own company worth setting up?
Sometimes, if your home is the main place of business and the fixed costs are significant. The rent must be commercial, the company deducts it, and you declare it as property income on Self Assessment with a share of household costs set against it. It also raises the exclusive use question on the house. We run the numbers both ways before anyone signs anything.
Related reading
Our take on this
For most owner-managed companies, using your home as an office should be a standing £6 a week payment set up alongside payroll, a room that still does something else at weekends, and the equipment bought properly through the company. That takes ten minutes to arrange and it never causes trouble.
Work out the actual costs when home genuinely is where the business runs from, and keep the calculation on file. Look at a rental agreement only when the figures are big enough to carry the extra personal tax and the question mark over the house.
None of it is worth much on its own. It matters because it is one of a dozen small things a growth accountant sets up once and keeps running, so the corporation tax figure is known before it lands. If that sounds like what is missing, answer a few quick questions and Crosby will come back with a recommendation.