Option 1 — the £6-a-week flat rate (easiest)
The company can pay you a homeworking allowance of £6 per week tax-free, with no receipts and no calculation required. It’s deductible for the company and about £312 a year in your pocket. For the vast majority of one-person companies working from home, this is the sensible default — safe, simple, and never questioned.
Option 2 — actual additional costs
If working from home genuinely costs you more than £6 a week — extra heating, lighting and metered costs used for the business — you can claim the actual additional cost, but you need a reasonable basis and records. It only covers the extra cost of working at home, not costs you’d pay anyway (rent, mortgage, council tax, standard broadband).
Option 3 — rent a room to your company
A director can formally charge the company rent for business use of part of the home under a licence agreement. The company deducts the rent; it’s taxable rental income on you, but you offset a proportion of household costs against it. It can be efficient where business use is significant — but it’s more involved, and exclusive business use of a room can affect the capital gains relief on your home, so take advice before setting one up.
Which should you use?
- Most one-person companies: the £6-a-week flat rate — safe and easy
- Heavy home use: consider actual costs, with records
- Substantial dedicated business space: a rental agreement may pay — with advice
We’ll set up the right one and keep it clean in your accounts. Call 0114 327 1480.