Using your home as an office: what changed on 6 April 2026

Until this spring there were two ways to get relief for the extra cost of working at home. A director could claim the additional household costs from HMRC personally through their tax return or a P87, or the company could reimburse them. The first route has closed. From 6 April 2026, a deduction from employment earnings for additional household expenses is disallowed where the employer has not reimbursed the cost. The change was announced at Budget 2025, and HMRC’s stated reason was that more than half of the claims it examined did not qualify in the first place.

The employer side is untouched. Your company can still reimburse you for qualifying additional household costs with no income tax and no National Insurance on the payment, and the cost reduces the company’s taxable profit.

For a single-director company this can feel like moving money between pockets, and in cash terms it nearly is. The practical point is that the reimbursement route is now the only one. If nothing leaves the company bank account or goes through the payroll, there is no relief at all, however many hours you worked in the back bedroom.

HMRC publishes a flat homeworking amount a company can pay a director without asking for receipts: £6 a week, or £26 a month if you would rather run it monthly through the payroll. It covers the extra heating, lighting, metered water and business calls that come from working at home under a homeworking arrangement. It is small on purpose and easy on purpose.

You can pay more than the flat amount where your genuine additional cost is higher, but then you need the workings and the bills to support the figure, and you need to be able to show why the extra cost arises from the work rather than from living in the house.

What the company cannot pay tax free is the part of your home you would be paying for anyway. Mortgage interest, rent and council tax do not become company costs because you answer emails in the spare room. Paying them from the business account creates a director’s loan or a benefit, and usually a conversation at year end that nobody enjoys.

Three things make it stand up: a short written homeworking agreement, a board minute recording it, and the payment showing in the payroll or the company’s records.

The other route is a formal licence between you and your company for the part of the house the company uses, at a market rate. The company deducts the rent against its profit. You declare the rent as property income on your self assessment and set a fair proportion of the running costs against it. Where the business use is real and substantial, the figures can be meaningfully better than the flat amount.

We recommend it less often than you might expect. It suits a director whose home is genuinely a working base: an online seller holding stock and packing orders in a converted garage, a consultancy with a permanent office room and client calls all day. It rarely suits someone who works from home two afternoons a week.

Before anyone signs one, check the mortgage or tenancy terms, tell your home insurer, and keep the space in mixed use rather than exclusive business use so that private residence relief on a future sale is not disturbed. Business rates can also come into it where a room is set up purely as business premises. None of that is a reason to avoid the arrangement, but all of it should be looked at before the first rent payment, not afterwards.

Equipment is the easier half of this topic and the half people under-claim. A laptop, a desk, a chair, a second monitor, packing equipment, accounting and design software bought by the company for business use are company costs, and larger items may qualify for the annual investment allowance in the year you buy them. Buy them in the company name where you can, and keep the invoices. Limited companies generally need to hold records for six years after the end of the accounting period.

Broadband and phone are where claims fall over. A home broadband contract in your own name, paid at the same price whether or not you work, is personal. It becomes a company cost where the contract is in the company’s name, or where the bill separately identifies business usage. A mobile contract taken out by the company for the director is treated differently again and is often worth moving over.

The other recurring errors are claiming a whole mixed-use cost without apportioning it, running household bills through the business account, and, for online sellers, treating a spare room full of stock as though no records are needed. Apportion, keep the invoice, and write down the basis once so you are not reinventing it every year.

Take the flat amount through the payroll, put the homeworking agreement and the board minute on file, and buy your equipment through the company. That covers most directors properly and takes about twenty minutes a year. If your home is genuinely a working base, with stock, staff or clients involved, then the licence conversation is worth having, with the mortgage, insurance and future sale questions looked at first.

One thing you should read online with care: the flat rate and hours-based methods that come up most often in search results apply to unincorporated businesses. They are not how a limited company handles this, and we see them copied into company accounts more often than any other expense error.

Honestly, this is a small line. The reason we still ask about it in a first meeting is that a director who has never been asked about homeworking has usually never been asked about the VAT scheme, the reliefs or the way they pay themselves either. That is where the real money sits, and the home office question is a quick way to find out how much attention the last accountant was paying.