As a director of a limited company, you can claim home office expenses through one of three main methods

Flat Rate Method

HMRC allows a flat rate of £6/week (£312/year) to be claimed without needing detailed records.

This is commonly used when the director works from home and incurs some costs such as electricity & heating.

The company can record this as an expense and credit the director’s loan account.

Actual Cost Method

Alternatively, directors can claim a proportion of actual household expenses. These include increased costs for heating, electricity, metered water, broadband and business phone calls

This requires:

A reasonable apportionment based on business use

Evidence of costs (invoices)

Formal Rental Agreement

Rental Agreement Between Company & Director

The company pays you rent at a market rate for using part of the home as office space.

This allows your company to claim a proportion of fixed costs like rent, mortgage interest, and Council Tax, in addition to variable expenses.

The director must declare the rent as income on their Self-Assessment Tax Return.

Director can deduct a proportion of household costs against that income.

Choosing how to claim home office expenses as a company director depends on the extent of your home working and the level of administrative effort you’re willing to take on.

The flat rate method offers simplicity and minimal record-keeping, while the actual cost method provides a fairer reflection of genuine expenses for regular home workers. For those with a dedicated office space and higher running costs, a formal rental agreement can deliver greater tax efficiency — provided it’s properly structured and supported by documentation.

 Unsure on which method is best for your business? Contact us today to find out.