Whether you're running your limited company from a dedicated home office space or managing company admin periodically from your kitchen table, it's important to understand the expenses your limited company can legitimately claim.  

Get it wrong and you could be missing out on valuable tax relief, or even creating unnecessary tax complications.  

In this blog we explore exactly how using your home as an office works for limited company directors, the range of methods available, and how you're able to maximise your claim whilst remaining compliant with HMRC's rules. 

• HMRC provides a simplified flat rate method, which may not offer the highest level of tax savings 

• Subject to specific rules, directors are able to charge their company rent for business use of their home 

• It's essential to ensure careful calculation of usage and record keeping, to maximise claims whilst remaining compliant 

Your limited company may be able to reimburse you for specific household costs associated with your business' use, when using part of your home for running your business. 

HMRC recognises that directors and business owners incur costs such as: 

• Electricity and heating bills 

• Broadband and telephone costs 

• In some circumstances, water rates 

• Rent / mortgage interest (where applicable) 

• Home insurance 

• Council tax 

It's important that all claims must relate to the proportion of your home that's being used for business purposes. 

So, for example, if you run your business for only part of the working week, only a reasonable percentage of relevant household expenses can be claimed.  

A Vantage client operated their limited company 100% from their home, and initially they claimed HMRC's flat-rate allowance. 

Their Vantage Client Director reviewed their circumstances and discovered they had a dedicated office which they used exclusively for running their business. They therefore switched to a more detailed calculation method, and were able to significantly increase their annual claim whilst remaining fully compliant with HMRC regulations. 

The results were greater corporation tax relief, and improved record-keeping, in case HMRC ever request to see evidence.  

Typically there are two approaches available to limited company directors: 

1. HMRC's simplified expenses method 

Your company reimburses you using HMRC's approved homeworking allowance, which is often considered the simplest method. It requires minimal administration and avoids complex calculations. 

Benefits include: 

• It's easy to operate 

• There's minimal record-keeping 

• There's a low risk of HMRC challenging it 

However, if as a director you are using your home exclusively for business purposes, this approach may not be the most tax efficient.  

2. Charging your limited company for use of home

Another option is to formally charge your company for using a specific part of your home as a dedicated office space. 

Advantages of using this method can give you: 

• Greater allowable claims 

• More accurate reflection of actual costs 

• Increased corporation tax relief for the business 

It's important to understand that calculations must be reasonable and correctly documented. Your Client Director can assist with calculating this. 

A lot of directors decide to use the simplest route, by having their company pay a homeworking allowance. This allows directors to not need to keep detailed evidence of each household bill and offers a straightforward solution for directors who work from home regularly.  

If your actual expenses significantly exceed the allowance, it could potentially be more valuable to produce a detailed calculation. 

The best option for you will depend on: 

• The frequency you work from home 

• Whether you have a dedicated office space  

• What your household running costs are 

• The amount of administrative effort you're willing to undertake 

Where a detailed calculation is appropriate, you may be able to consider a proportion of your: 

• Gas and electricity 

• Broadband and internet 

• Water rates 

• Home insurance 

• Mortgage interest (not mortgage capital repayments) 

• Rent 

• Repairs and maintenance relating to the business area 

The allowable proportion is usually based on factors such as: 

• Number of rooms in the property 

• Time spent using the space for business 

• Percentage of business versus personal use 

Every situation is different, so obtaining professional advice can help ensure calculations are both accurate and tax efficient. 

It's easy to make mistakes when claiming for home office expenses. Common mistakes include: 

Claiming personal costs in full 

You're only able to claim the business element of the household expense. 

No supporting evidence 

It's important for directors to keep records of:  

• Utility bills 

• Broadband invoices 

• Home insurance documents 

• Any calculations used 

Creating capital gains tax risks 

If you exclusively use a room for business purposes, it can create implications when it comes to selling your home. Ensuring a level of personal use is often advisable.  

Using an arbitrary percentage 

Claims must always be justifiable and based on a reasonable methodology.  

The right approach will depend on your circumstances. If you occasionally work from home, then you may find the simplified allowance works best for you and your business. 

If you're running your business entirely from your dedicated workspace within your home, you may benefit from a greater detailed calculation or a formal use-of-home arrangement.  

Your Vantage Accounting Client Director can help you understand your choices when it comes to claiming everything you're entitled to without increasing your tax risk. 

Working from home can now be a normal part of running a limited company, but many directors are either underclaiming valuable expenses or claiming incorrectly. 

Understanding the options available can help reduce your corporation tax bill while ensuring you remain fully compliant with HMRC requirements. Whether you're using the simplified allowance or calculating actual costs, keeping accurate records and taking professional advice can make a substantial difference. 

If you're unsure how much your limited company could claim for using your home as an office, the Vantage Accounting team of experts can help review your circumstances and identify the most tax-efficient approach. Get in touch today to find out how they're able to help.