A limited company can pay a director £6 a week (£26 a month, or £312 a year) for working from home, tax-free, without the director keeping receipts. If the director's genuine extra costs are higher, the company can reimburse the actual additional household costs, provided there is evidence. A third route, the company renting part of the home, deducts the rent from company profit but creates rental income and a capital gains tax issue for the director. Since 6 April 2026, a company payment is the only way a director gets tax relief for working from home.
This article explains each route, what cannot be claimed, and what to keep on file.
The April 2026 change: why the company payment now matters
Before 6 April 2026, an employee required to work from home could claim an Income Tax deduction from HMRC for the extra household costs, either on actual costs with evidence or at a fixed £6 a week without receipts. A director of a limited company is an employee of that company for this purpose.
That claim has gone. HMRC's published description of the measure says it takes effect from 6 April 2026 and inserts section 360B into the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Section 360B disallows a deduction for additional household expenses that the employer has not reimbursed.
The change applies only to costs the employer does not reimburse. HMRC states that employers can still reimburse eligible homeworking costs without deducting Income Tax or National Insurance contributions.
HMRC gave its reason as non-compliance: after checking claims, it found that over half were ineligible. It estimated that about 300,000 people would be affected, with a tax increase of £62 for a basic rate taxpayer and £124 for a higher rate taxpayer. Those figures are a useful measure of what was at stake for an employee on the £6 rate.
For a director who controls the company, the practical consequence is simple. If you work from home and your company pays nothing towards the cost, you get no relief for it. If the company pays a qualifying amount, the payment is tax-free to you and a deduction for the company.
Option 1: the £6 a week payment
HMRC's Employment Income Manual (EIM01476, which deals with section 316A ITEPA 2003) says that from 6 April 2020 an employer can agree a payment of £6 per week, or £26 per month for monthly paid employees, to an employee working regularly at home, without having to justify the amount. The employee does not have to keep records of the additional expenditure. HMRC adds that it expects £6 a week to be sufficient in most cases, particularly where the extra cost is only heating and lighting the work area. The rate was £4 a week (£18 a month) for the tax years 2012 to 2020.
The conditions
The £6 rate removes the need to prove the amount. It does not remove the need for the arrangement itself to qualify.
- Homeworking arrangements. There must be an agreement between you and the company that you regularly perform some or all of your duties at home. For a director, put it in writing: a dated, signed board minute or short letter that says your home is a workplace for the company and gives the weekly or monthly amount.
- Household expenses. The payment must be for expenses connected with the day-to-day running of your home, typically extra heating and electricity.
- A real reason to work at home. HMRC's approach, as reported by advisers, is that directors, particularly of service companies, can find the tests hard to meet. A claim is generally accepted where there is an objective requirement to work from home, for example where the client provides no premises and there is nowhere else to do the work. If you rent an office or hot-desk elsewhere every day, a home office payment is hard to justify. The same applies if the company already has an office you use.
- Work that earns for the company. Time spent at home on work that produces nothing for the company does not support a payment.
Where the arrangement qualifies, the payment is not reported on a P11D and does not go on your Self Assessment return. Where it does not qualify, the risk is that HMRC treats the payment as earnings subject to Income Tax and National Insurance. That is why the written agreement is worth the ten minutes it takes.
Worked example: the flat rate
A director is paid £26 a month through the company's expenses.
- £26 × 12 = £312 a year (the same as £6 × 52).
- The company records £312 as an allowable expense, which reduces its taxable profit.
- The director receives £312 free of Income Tax and National Insurance, with no receipts and nothing to declare on Self Assessment.
Choose weekly or monthly and stay consistent. A monthly payment of £26 is the usual way to do this for a director paid monthly.
Option 2: reimbursing actual additional costs
The £6 figure is a guideline, not a ceiling. EIM01476 says greater amounts can be paid where the employer has evidence to justify them, and gives two ways of doing it:
- A scale rate. The employer agrees in advance a payment calculated to do no more than reimburse the average additional cost employees meet working at home. It can be set to rise annually with inflation. If the scale rate is based on cost records the employees kept, they do not need to keep evidence afterwards.
- Actual costs. The employer reimburses the actual additional costs of each employee. HMRC expects the employer to keep records showing how the payments were worked out, which in turn depends on the evidence the employee holds.
For a one-director company, the actual cost route is the one that applies. The test is additional cost: money you spend because you work at home, not money you would spend anyway.
How to apportion
A common method is to work out the share of the home used for work and the share of time it is used:
- Divide the number of rooms used for work by the total rooms.
- Multiply by the proportion of the week the room is in business use.
- Apply that proportion to the eligible household costs.
For this purpose a "room" is a normal living space, so leave out bathrooms, hallways and porches.
Worked example: when actual costs lose
The home has 5 rooms. One is a home office used 8 hours a day, 5 days a week. Annual heating, electricity and broadband cost £3,600.
- Room proportion: 1 ÷ 5 = 20%.
- Time proportion: (8 × 5 × 52) ÷ 8,760 hours in a year = 23.7%.
- Combined: 20% × 23.7% = 4.74%.
- Claim: £3,600 × 4.74% = £170.64 a year.
The flat rate of £312 is higher, so the £6 payment is the better choice here, and it needs no evidence.
Worked example: when actual costs win
This is an illustration, not a typical case. A home has 6 rooms. One room is used 10 hours a day, 5 days a week, 52 weeks a year. Eligible household costs are £9,000 a year.
- Room proportion: 1 ÷ 6 = 16.67%.
- Time proportion: 2,600 ÷ 8,760 = 29.68%.
- Combined: about 4.95%.
- Claim: £9,000 × 4.95% = about £445 a year.
That is about £133 more than the flat rate, and that excess must be supported by bills and a written calculation. Whether £133 is worth the paperwork is your call. For many directors it is not.
Watch one trap. If the company pays a bill such as broadband in its own name and you also use it privately, the private use is a benefit in kind, and tax is due on it.
Option 3: renting part of your home to the company
A limited company is a separate legal entity, so it can pay you rent for space in your home. The company includes the rent as an expense in its Company Tax Return. You declare the rent as personal rental income on Self Assessment and pay tax on it.
To make this work, the arrangement needs:
- a room dedicated to the business;
- rent at a commercial rate;
- a formal written agreement signed on behalf of both parties; and
- an annual review of the rent.
You cannot pass on all of your own rent or mortgage interest. The agreement should cover a proportion of the costs of the space, taking account of things like council tax and utility bills.
The capital gains tax cost
This is the part that makes many directors think twice. When you sell the home, the part used for business does not qualify for private residence relief, so a capital gains tax charge can arise on that share of the gain. If you build a separate structure such as a garden office, there are further tax considerations to check before you build.
The tax effects point in different directions: a deduction for the company, income for you, and a possible charge on sale. Whether the combined result beats a £312 flat payment depends on your tax position, the rent a commercial rate would support, and how long you expect to own the property. It needs a calculation with your accountant before you sign anything. We do not recommend rent as a default.
What you cannot claim
A director is treated as an employee, and the rules for employees are narrower than those for sole traders. Only additional household costs qualify. Fixed costs that you would pay whether or not you worked from home do not.
That means the following are not payable tax-free to a director:
- Mortgage capital repayments.
- Mortgage interest.
- Rent on your home.
- Council tax. It is a fixed cost, and the extra rules that let sole traders claim a share of it where part of the home is used solely for the business do not apply to a director taking an expense payment.
- Costs that exist regardless of working from home, and general wear and tear.
The sole trader flat rates of £10, £18 and £26 a month (by hours worked) are part of a different system for the self-employed. Do not apply them to a limited company director. Use the £6 a week employer rate.
Records to keep
| Arrangement | Keep |
|---|---|
| £6 a week / £26 a month | The signed board minute or agreement; payment records. No cost evidence is needed. |
| Actual costs above £6 a week | The above, plus household bills and a written calculation of the business-use proportion. |
| Rent | The signed rental agreement, the annual review, and rent payment records. |
Whatever you choose, the company's accounts should show the payment as a business expense and the paperwork should match what was actually paid. Staying consistent also matters: a payment that starts at £26 a month and drifts to a different figure without a new minute is the kind of thing that draws questions.
Which route to choose
For most one-director companies, the £6 payment is the sensible default: no calculations, no receipts, and a small reduction in corporation tax. Move to actual costs only when your genuine additional costs clearly exceed £312 a year and you are willing to keep the evidence. Treat the rent route as a decision with a tax consequence that stays with you for as long as you own the home.
The same principle runs through contractor expenses through a limited company: the company can reimburse a cost only when the rules for that specific cost are met. Small, well-documented payments, such as those covered in our note on trivial benefits for directors, are the ones that tend to go unchallenged.
If your company is contractor-owned and you want the homeworking payment handled correctly in the year-end accounts, our accounts for contractors page sets out what we prepare.
Frequently Asked Questions
Can a limited company director claim use of home as office?
Yes, through the company. The company can pay a director £6 a week (£26 a month) tax-free without evidence, or reimburse higher actual additional costs with evidence. The director can no longer make a standalone Income Tax claim for unreimbursed costs, from 6 April 2026.
Is the £6 a week payment taxable?
No, where the arrangement qualifies. HMRC's manual says the employer does not have to justify the amount and the employee does not have to keep records. You should still have a written homeworking agreement in place.
Can I pay more than £6 a week?
Yes. HMRC says £6 is not a maximum, but amounts above it must be justified with evidence, either through an agreed scale rate or by reimbursing actual additional costs with records.
Can I claim a share of my mortgage or rent?
No, not as a tax-free expense payment. Mortgage capital repayments, mortgage interest and rent are fixed costs, not additional household costs. If you want the company to pay for space in your home, that is the separate rental arrangement, with rental income for you and a capital gains tax consequence on sale.
What happens if I have no homeworking agreement?
The payment risks being treated as earnings, subject to Income Tax and National Insurance. A dated and signed board minute is enough.