Work from Home Expenses for Limited Company Directors

Working from home appeals to many, and the number of people doing so has grown significantly since the pandemic. As a company director, you need to decide if this works for you – read on to find out more about the expenses you can claim, as well as the tax implications.

What Can My Limited Company Claim?

You have three options for claiming work from home expenses through your limited company:

  • The HMRC guideline rate
  • Additional household costs
  • Rental agreement between you and your company

Whichever option you go for as a homeowner, note that a room or garage used solely for business purposes could trigger Capital Gains Tax if you come to sell – though this can be alleviated if rooms have dual purpose, e.g. a home office that’s also a guest bedroom. However, everybody’s circumstances are different, so if you’d like to discuss yours further, please do get in touch.

Option 1: Use HMRC Guideline Rate

For the 2022/23 tax year, HMRC’s guideline rate to claim work from home expenses is £6 per week, £26 per month, or £312 per year (if claimed every week). For a limited company, this is an allowable expense for Corporation Tax purposes, and pays towards general expenditure such as light and heat. No record-keeping or evidence is required, making it an easy claim.

N.B. Internet and phone bills aren’t included as household costs – to claim the full amount, you’ll need to have contracts in the company name, or be able to specifically identify the business element. Continue reading for more details.

Option 2: Claim for Additional Costs

For additional costs, such as increased gas, electricity and/or phone bills due to business use, you can claim more than £6 per week – but you’ll need to keep records and provide evidence. You can’t claim for non-separable personal/business use costs, e.g., council tax and/or broadband.

Alternatively, you could set up a scale rate payment, where you will be reimbursed for the average increase in your household costs. Initially, evidence will be required for a sample bill, but afterwards, you won’t need to check each one.

These expenses are allowable for your company, and as the director, you will receive a tax-free payment.

Option 3: Set Up a Rental Agreement

The third option to claim work from expenses is to set up a rental agreement between yourself and your limited company – where you, as the director, rent office space from yourself, as the individual.

It must be a formal commercial agreement, and you should charge yourself rent at the market rate. The agreement could also include allowable business costs such utility bills and/or council tax, but you must be able to justify the amounts, and review the agreement regularly.

For your limited company, this will be an allowable expense, but as an individual, there will be tax implications, as you’ll need to declare the rent income on your Self-Assessment Tax Return. If the property is jointly owned, you will need to split the tax according to ownership.

Need Help with Working from Home Expenses?

At Mercian Accountants, you’ll find extensive industry experience, and an understanding of a wide range of limited companies. If you need advice so you can focus on running your business, our team of experts are here to help. Either drop us a message through our contact form, call 01743 562430, or email today.

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