Can I charge my company rent for using my home?

If you run your company from home, there are two main ways your company can pay you for using your home.

Option 1 — Company pays you for part of the household bills

This is the most common and easiest way.

Your company can pay you a small amount to cover the extra costs of working from home, such as:

• electricity

• heating

• internet

• general running costs

You have two choices here:

A. Flat rate

• The company can pay you £6 per week without needing detailed calculations.

B. Actual costs

• You can work out the real extra cost of working from home and recharge that to the company.

But there are important limits:

Because directors are treated as employees for this purpose, you cannot claim:

• mortgage interest

• your rent

• water rates

• costs without receipts

So this option only covers extra household running costs, not the cost of your home itself.

Option 2 — Charge your company rent

If you run your company from home, you can charge your company rent for using part of your home.

This is done through a formal agreement between you and your company.

How it works

• You personally own the house

• Your company uses part of it for business

• So your company pays you rent

• You then declare that rent on your personal tax return

Why people do this

It allows you to:

• Take money out of the company without National Insurance

• Claim a share of your household costs against that rental income

For example, you can claim part of:

• Mortgage interest (not the full mortgage)

• Council tax

• Electricity, gas, water

• Internet and phone

• Repairs and cleaning

This reduces the tax you pay on the rental income.

Important rules (this is where people get it wrong)

1. You must have a proper agreement

• You cannot just “decide” to charge rent

• You need a simple written agreement (called a licence agreement)

• It should not be backdated

  
  

2. The rent must be reasonable

• It should be similar to what you’d pay for a small office locally

• If it’s too high, HMRC may challenge it

3. Keep it non-exclusive (very important)

• This means the room is not used only for business

• You still use it personally (e.g. spare room / office)

• This protects your Capital Gains Tax exemption when you sell your home

Tax position

• Income Tax:

  You pay tax on the rent you receive (after expenses)

  
  

• National Insurance:

  No NI is due on rental income

  
  

• Capital Gains Tax (CGT):

  • No issue if the space is non-exclusive

  • If it’s only used for business, you could lose part of your tax-free gain when selling your home

    
    

• Inheritance Tax (IHT):

  No major impact in most normal cases

With this option you are effectively becoming your company’s landlord for a small part of your home.

Done properly, it’s tax-efficient. Done incorrectly, it can trigger HMRC issues.