Working from home, flat rate or actual cost

Neither route is automatic, because the exemption needs homeworking arrangements, and HMRC sets two tests: "there must be arrangements between the employer and the employee" and "the employee must work at home regularly under those arrangements". It adds that the exemption "does not apply where an employee works at home informally and not by arrangement with the employer".

As sole director you are both sides of that arrangement, so write it down. A short homeworking agreement or a board minute is enough.

Without one the £312 is not exempt at all. It is earnings, and it should have gone through payroll with tax and National Insurance deducted.

Source: EIM01472: homeworking arrangements, checked 2026-08-28.

The exemption covers additional household expenses, so the only thing that counts is what the work adds. HMRC allows "reasonable additional household expenses", typically "the additional costs of heating and lighting the work area or the metered cost of increased water use", and it notes there might also be increased charges for internet access, home contents insurance or business telephone calls.

A share of your whole bill is not additional, because you were heating the house anyway. Room and hours apportionment is the self employed convention under a different set of rules, and applying it here produces a figure that is too high and is taxable to the extent it overshoots.

HMRC's own employee example measures the rise directly rather than dividing anything up: "On average the employees' electricity and gas bills increase by £15 per quarter (less in summer but more in winter) after they begin to work at home".

Source: EIM01474: what counts as an additional household expense, checked 2026-08-28.

HMRC's own example comes to £218, against a flat rate of £312.

That example even includes £100 of business rates, which almost no spare-room director incurs, and even that figure is only the net increase over the council tax that would otherwise have been paid rather than a whole rates bill. It still falls £94 short of the figure you can take with no evidence at all. If HMRC's own illustration of a genuine claim does not clear the guideline rate, most real ones will not either.

Source: EIM01478: example of the additional household costs, checked 2026-08-28.

Anything that costs the same whether or not you work at home is out. HMRC "excludes costs that would be the same whether or not the employee works at home, for example mortgage interest, rent, council tax or water rates". The "for example" is doing real work in that sentence, because the principle catches standing charges too, not only the four items named.

It "also excludes expenses that put the employee into a position to work at home, for example building alterations or the cost of furniture or office equipment", so a desk and a chair are dealt with under different rules rather than through this payment.

Broadband follows the same logic and usually comes to nothing. Where you already pay for a connection "there is no additional expense", and a payment made anyway "should be subject to PAYE and NICs". The fee only becomes reimbursable where you had no connection already and you need one in order to work from home, and HMRC's employer guidance adds a third test that the manual does not, which is that the connection is mainly used for business. Treat all three as the bar, and note that a line someone else in the house already pays for counts as already available.

Reimburse more than the genuine additional cost and the excess is earnings, taxed through payroll with Class 1 National Insurance for both of you on top, which is how a saving of a few hundred pounds turns into a correction.

Business rates deserve a word of warning here, because they usually arrive once part of the home has become non-domestic, which is the same thing that puts the capital gains relief on your own home at risk, so treat a rates bill as a reason to talk to us rather than a box to fill in.

Above £6 a week you can also agree a scale rate with HMRC in advance, calculated from records of actual costs, which removes the ongoing evidence burden. Ask us if your costs genuinely run high.

Source: EIM01474: what is excluded from an additional household expense, checked 2026-08-28.

Source: EIM01475: broadband, and payments that must go through PAYE, checked 2026-08-28.

Source: EIM01476: scale rate payments above the guideline rate, checked 2026-08-28.

Source: Expenses and benefits: homeworking, on the broadband conditions, checked 2026-08-28.

The £6 is for each week you actually work from home rather than each week of the year, which is why the calculator lets you reduce the weeks and why a company incorporated part way through gets a smaller figure.

The employee's own claim for costs nobody reimbursed went on 6 April 2026, and reimbursement by an employer was deliberately left alone: the measure "will not impact the existing ability for employers that reimburse employees for costs relating to homeworking where eligible without deducting Income Tax and National Insurance contributions". That "where eligible" points straight back at the arrangements condition above.

Source: Removal of tax relief on non-reimbursed homeworking expenses, checked 2026-08-28.

The company pays you and deducts the cost against its own profits, with no income tax, no National Insurance, no P11D entry and nothing to report on your personal return.

Pay it separately from salary so the record shows what it was for, and keep the homeworking agreement with the payroll records. On the actual cost route keep the before and after bills as well, because the evidence is the only thing standing between an exempt payment and a benefit in kind.

One thing to avoid: do not use a room exclusively for business. Private residence relief is what keeps the gain on your own home out of capital gains tax, and GOV.UK sets the test as whether part of your home has been used exclusively for business, noting that a room used as a temporary or occasional office does not count, so a desk in the spare room is fine while a room only the company uses could cost you part of a relief far larger than the £312 this page is about.

Source: Tax when you sell your home, checked 2026-08-28.

Source: Expenses and benefits: homeworking, checked 2026-08-28.

This is a calculator, not advice on your own affairs, and there are cases it does not model.

• It assumes one employer. The exemption covers the additional cost you actually incur, and you only incur it once however many jobs you hold, so two homeworking employments do not give you two lots of £312.
• It assumes the company already runs a payroll. A directorship is an office, so the exemption is available even where you take no salary, but whether the company needs a PAYE scheme at all is a separate question worth settling before the first payment.
• Renting a room to your own company is a different route entirely. A licence agreement can move more money than either option here, and it brings rental income on your personal return with it. That is a conversation, not a calculator.
• Sole traders are excluded on purpose. Self employment has its own simplified expenses rates based on hours worked, and the rules on this page do not apply to it.

Source: EIM01476: the guideline rate and scale rate payments, checked 2026-08-28.