One of the best parts of running your own limited company is the flexibility it lets you enjoy. Whether you’re renting out office space or working in the comfort of your own home office, you can make your own rules about when and where you work. And if your home does double as your workspace, did you know you can claim certain expenses for using it? 

Understanding how to claim expenses for “use of home as office” as a limited company is important as it can reduce your tax bill. It can make sure you’re being compensated fairly for the genuine costs of running your business from home. 

In this guide, we’ll break down what you need to know about claiming home office expenses - from which home office expenses are claimable to the different ways of claiming them - so you can make sure you’re getting all the benefits your limited company is entitled to. 

Which home office expenses can you claim?

When you use your home as an office for your limited company, you're allowed to claim certain expenses related to this usage, such as increased electricity or water use, or paying for office equipment like desks, laptops and printers. 

However, it's important to understand that you can only claim for costs incurred as a result of working from home. This means you can’t claim in full for fixed costs like mortgage payments or rent that you would have to pay regardless of whether you work from home or not (although, with some methods of claiming, rent and mortgage payments are factored in). 

The method you use to claim home office expenses affects what you can claim expenses on, so let’s walk through the different ways you can approach claiming home office expenses.

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How to claim home office expenses: the 3 main methods

There are three main ways you can go about claiming home office expenses for your limited company:

1. Using HMRC's flat rate allowance
2. Calculating a proportion of household expenses
3. Setting up a formal rental agreement between you and your company

Different methods will work better for different people depending on circumstances, so let's dive into each of these options in a little more detail.

1. Using HMRC’s flat rate allowance

HMRC allows directors of limited companies to claim a flat-rate monthly allowance for using their home as an office. For the 2024/25 tax year, this is £6 per week, totalling £312 annually if you claim it for every week. 

This amount is considered an allowable expense for Corporation Tax purposes and contributes towards general utility expenses like heating and electricity.

The pros of this method are that it’s simple and straightforward, as there’s no need to keep detailed receipts or provide HMRC with any evidence. This makes it a great option if your business-related home use is minimal.

However, this method doesn’t include costs for internet or phone bills, and may not fully cover all your actual expenses if you use a significant portion of your home for business. If that’s the case, one of the following two options might be a better fit for you.

2. Claiming a proportion of your household expenses

If your business use of your home is a little more significant, with the costs of working there going beyond what HMRC’s flat rate covers, it might be best to claim a proportion of your household expenses. 

This method does require more detailed record-keeping, but it can potentially result in a higher claim, covering things like utilities, internet and phone bills, cleaning costs and even a portion of your home insurance.

To calculate this you’ll need to:

• Identify the total utility costs: This includes expenses such as electricity, gas, telephone/internet line rental, buildings insurance, building repairs/maintenance, and even mortgage interest, rent, and council tax.
• Calculate business usage for each room: Determine what percentage of each room is used for business purposes. For example:
  • Kitchen: 0% business usage.
  • Sitting room: 25% business usage.
  • Office: 95% business usage.
  • Bedrooms: 5% business usage.
• Combine the usage percentages: Add up the percentages across all rooms to calculate the total percentage of your home used for business. Using the example above, the total business usage would be 25% of your home. You can claim up to this percentage of your total utility costs as business expenses. 

Please note that this is a general guide to what you might be able to claim. For tailored advice based on your circumstances, we recommend consulting a qualified accountant to ensure your claims are accurate and compliant.

Additional Considerations:

While you can calculate a percentage for most utility bills, claiming for fixed costs like mortgage interest, rent, or council tax requires meeting specific criteria. If you have a separate phone or broadband contract exclusively for your business, you can claim 100% of those costs.

It’s also essential to keep detailed records to justify your claims to HMRC, such as itemised phone bills showing business-related calls or estimates of the percentage of internet usage for business purposes.

3. Setting up a ‘Director’s Use of Home Agreement’

For limited company directors who use a significant portion of their home for business on a full-time basis, setting up a formal rental agreement between yourself and your company might be a good idea. 

Setting up a commercial ‘Director’s Use of Home Agreement’ with your limited company means you, as an individual, are officially renting office space to your limited company.

This agreement states the terms under which your company uses your home office and outlines the amount your company pays you to use it (which should be market rate rent).

The rent then becomes an allowable expense for your company and you, as an individual, must declare the rental income on your Self Assessment tax return.

Having a commercial agreement like this in place helps prove to HMRC that the arrangement is legitimate, so there are no complications during an audit. It can also lead to a potentially higher claimable amount for your business compared to other methods, and it helps outline a clear separation between your personal and business use of your home.

Still, there are plenty of things to take into consideration with this method. For example, you might need to pay personal tax on the rental income you receive, and there could be Capital Gains Tax implications if and when you sell your property. We would strongly recommend getting professional advice from a professional accountant or tax advisor before implementing this option.

Claiming additional expenses for your limited company’s home office

Beyond the basic running costs, there are a few other expenses you can claim when using your home as an office for your limited company.

For example, you can claim the cost of:

• Office equipment and furniture: If it’s something that’s exclusively for business purposes (including office desks and chairs, filing cabinets, printers, scanners and computers), you can claim it. If you’re just starting out and looking to set up a home office without breaking the bank, we recommend you check out our guide here.
• Broadband and phone bills: If your broadband and phone contracts are in your company's name, you can claim the full amount as a business expense. If they're in your personal name, you can only claim for the portion used for business purposes, which may require more detailed records of usage.
• Stationery and supplies: Basic office supplies such as paper, pens, ink cartridges and stamps can also be claimed as business expenses.

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Important considerations when claiming home office expenses

When you’re claiming home office expenses for your limited company, make sure to keep these points in mind:

1. Exclusive business use: If you use a room in your home exclusively for business purposes, it may affect your Capital Gains Tax relief when selling your property. To avoid this, ensure the room has a dual purpose (e.g., a home office that's also a guest bedroom).
2. Insurance and mortgage terms: It’s worth checking that your home insurance policy and mortgage agreement allow for business use of your property.
3. Business rates: In some cases, using part of your home for business might make that portion liable for business rates. Always consult with a professional to understand the best thing to do in your specific situation.
4. Avoid overclaiming: Claiming excessive or unjustifiable expenses (like claiming expenses on personal broadband use) can trigger scrutiny from HMRC. Make sure your claims are reasonable and backed by accurate records. For items or spaces used for both personal and business purposes, always adjust claims to reflect the business-use portion only.
5. Record-keeping: Keep detailed records of all your business and home office expenses, especially if you're claiming more than the flat rate allowance. Without proper documentation, you may struggle to justify your claims during an HMRC enquiry. 
6. Regularly review your home office expenses: Business circumstances can change, so regularly review your home office expense claims to ensure they’re still accurate.
7. Get professional advice: Always consult a professional tax advisor or accountant to make sure you’re claiming correctly and maximising your allowances.

Ready to claim your home office expenses for your limited company?

If you spend a lot of time working from home, taking the time to understand what you can claim and how to do it correctly doesn’t just help you save money - it makes your business more efficient and sustainable.

So, whether your home office is a spare bedroom, a corner of the dining room or a dedicated workspace, don’t leave money on the table. And if you’re unsure about any aspect of claiming home office expenses as a limited company, consulting a tax professional - like our dedicated team at Crunch - is the best way to ensure you’re claiming your expenses correctly, so your business stays tax efficient and you keep your peace of mind.

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