Working from home as a limited company director is extremely common, especially since the pandemic. Naturally, you want the company to contribute to the cost of running your home office. After all, your home is now your business premises. The question of whether your company can pay your rent is one we hear regularly, and the honest answer requires some care.
The short version is: your company cannot simply pay your rent as a business expense. But there are legitimate and HMRC-approved ways to claim a contribution to home running costs through your company, and the amounts can be meaningful.
Why Your Company Cannot Just Pay Your Rent
Your home is a personal asset or your personal tenancy. The rent you pay is a personal expense. When your limited company pays a personal expense on your behalf, HMRC treats that as a benefit in kind, which means you would pay income tax on it and the company would pay employer NI. The company does not get a clean Corporation Tax deduction either.
More importantly, if your company tried to take a lease on your home to make the payments legitimate, you would face:
- Capital Gains Tax implications when you eventually sell the property (it would lose principal private residence relief on the business-use proportion)
- Council tax and planning permission questions
- Complications with your mortgage or landlord
None of this is worth it for the sake of a home office claim.
What Changed in April 2026
The Correct Method: Employer Payments for Home Working
HMRC allows a company to pay its employees (including directors) a tax-free sum to cover the additional costs of working from home.
To pay this:
- The company makes a payment of £6 per week (or £26 per month, or £312 per year) to you via payroll or bank transfer
- It is recorded in the company accounts as a staff expense
- It appears on your payslip separately or is documented clearly
If you want to claim more than £6 per week, you need to justify the additional costs with actual evidence. HMRC allows higher payments where you can demonstrate that your actual additional costs exceed £6 per week, but you need receipts and calculations to support the amount.
Calculating Actual Additional Home Working Costs
If £312 per year feels insufficient given your actual energy, heating, and broadband costs, you can use the actual cost method. This requires identifying and documenting your additional costs.
Can include
- Additional heating during working hours
- Additional electricity during working hours
- Additional broadband (if you upgraded for business purposes)
- Business-related phone costs
Cannot include
- Rent or mortgage interest
- Council tax
- General household running costs
- Costs you'd pay regardless of working from home
To calculate the proportion, divide the business-use hours by the total hours the room is used. For example, if you heat your study for 8 hours during working hours and use it personally for 4 hours in the evening, your business proportion is 8/12 = 67%. Apply that to the additional heating cost of the room.
Rent-a-Room for Home Office: Not Applicable
You may have heard of the Rent-a-Room scheme, which allows you to earn up to £7,500 per year tax-free by renting space in your home. This does not apply to renting space to your own company. HMRC does not allow you to rent your spare room to a company you control and claim the rent as a tax-free receipt. This arrangement lacks commercial substance and HMRC would challenge it.
Equipment Purchased by the Company for Your Home
This is where a meaningful saving is often missed. If your company buys equipment for you to use at home for business, such as a desk, chair, monitor, laptop, webcam, printer, or broadband router, these are company assets. The company claims them through capital allowances (typically 100% via the Annual Investment Allowance in year one). You use them without any personal tax charge, provided they are genuinely for business use.
What the Company Can and Cannot Do
What the company CAN do
- Pay £6/week (£312/year) tax-free working from home allowance
- Reimburse documented additional energy costs
- Purchase and own home office equipment
- Pay for a co-working space or registered address
- Pay for business broadband in the company name
What the company CANNOT do
- Pay your personal rent or mortgage
- Rent your spare room from you tax-free
- Claim a proportion of your fixed household costs
- Take a lease on your home
Client C was a software developer running his own limited company from home. He had been trying to claim a proportion of his £1,800 monthly rent through the company. His previous accountant had flagged this as a problem but not explained the alternatives.
When we reviewed his position, we set up a £6 per week employer payment through payroll (£312 per year, tax-free to him, Corporation Tax deductible for the company), calculated his actual additional energy costs attributable to his home office at approximately £680 per year, and had the company purchase a new ergonomic chair (£380), a second monitor (£220), and a webcam (£85), all claimed through the Annual Investment Allowance.
| Item | Amount |
|---|---|
| £6/week employer payment | £312 |
| Additional energy reimbursement | £680 |
| Home office equipment (AIA) | £685 |
| Total company cost | £1,677 |
| Corporation Tax saving at 19% | £319 |
| Personal tax cost to director | £0 |
His rent remained a personal expense paid from his salary and dividends, as it always should have been.
Frequently Asked Questions
Need to set up your home working expenses correctly?
At Your Tax Help Accountants in Stanmore, we set up home working cost structures for limited company directors as part of our standard engagement. We serve directors across Harrow, Wembley, and London.
Or email info@yourtaxhelp.co.uk | yourtaxhelp.co.uk