Important Rules for Company Directors (2026-27)
As a company director/employee, your home expense claims must pass the "wholly, exclusively and necessarily" test (s336 ITEPA 2003). This is much stricter than the self-employed test. HMRC rules mean you cannot claim Council Tax, Rent, Mortgage Interest, or Water Rates — these have a "duality of purpose" and fail the test. You can claim incremental costs such as electricity and gas (heat & light) and a proportionate element of home insurance and broadband. Alternatively, consider a formal Licence Agreement between yourself and your company — take professional advice before proceeding.
Annual Household Expenses
Enter Your Total Annual Bills
Enter the full annual household amount for each expense. The calculator will apportion them based on your business use. Leave blank or zero if not applicable.
Fields greyed out are not claimable by Company Directors
Council Tax, Water (Rates), and any Rent or Mortgage Interest fail the "wholly, exclusively and necessarily" test and cannot be claimed. Only electricity, gas, insurance, and broadband are allowable on a proportionate basis.
Additional Expenses (Optional)
Common Additional Expenses for Self-Employed
Mortgage Interest (not capital repayment), Rent, Repairs & Maintenance, Broadband/Internet, Ground Rent / Service Charges.
Fixed costs (e.g. mortgage interest, rent) use Space % only. Variable costs (e.g. broadband) use Space × Time.
Additional Expenses — Directors
You can only add incremental variable costs such as Broadband/Internet. You cannot add Rent, Mortgage Interest, or Council Tax-related items. Any amount you enter here should be the portion genuinely and exclusively incurred for business.
Room Details
Room Count Method (HMRC 2026-27)
Enter the total number of rooms in your property below (typically excluding bathrooms and hallways unless they have genuine business use). Then add each room you use for business. HMRC uses the number of rooms as the basis for apportionment rather than floor area in most cases.
Important: Business Use
Only claim rooms with genuine, regular, and substantive business use. HMRC expects claims to be reasonable and fully evidenced. A room used partly for business and partly personally should reflect that split in the hours entered.
How the Calculator Works — HMRC 2026-27
Who Can Claim What?
Self-Employed / Sole Traders (s34 ITTOIA 2005)
The test is "wholly and exclusively" for trade. HMRC allows apportioned claims for:
- Council Tax — Fixed cost, apportioned by space (rooms)
- Electricity & Gas — Variable, apportioned by space × time
- Home Insurance — Fixed, apportioned by space
- Water (metered only) — Variable, apportioned by space × time
- Mortgage Interest (not capital) — Fixed, apportioned by space
- Rent — Fixed, apportioned by space
- Broadband / Internet — Variable, space × time (business portion)
CGT Warning: Claiming business use of home may create a Capital Gains Tax liability on your main residence when you sell. Seek professional advice if making substantial claims.
Company Directors / Employees (s336 ITEPA 2003)
The test is "wholly, exclusively AND necessarily" — far stricter. HMRC's position (BIM47820) is that most household costs fail this test due to "duality of purpose". Directors CANNOT claim:
- Council Tax — Payable regardless of business use; duality of purpose
- Rent / Mortgage Interest — Payable regardless; not "necessary" for duties
- Water Rates — Fixed charge; not exclusively for business
Directors CAN claim the incremental portion of:
- Electricity & Gas — Additional cost of working from home (space × time)
- Home Insurance — If the insurer is notified and business use is covered
- Broadband — If genuinely and exclusively for business (or business portion)
Licence Agreement option: A company can pay its director a market-rate "use of home" allowance under a formal Licence Agreement. This converts a personal claim into a company payment and may allow broader deductions. Always obtain professional advice first.
Room Count Method (2026-27)
How Space % is Calculated
HMRC accepts the number-of-rooms approach. The formula is:
Space % = (Rooms used for business) ÷ (Total rooms in property)
- Typically exclude bathrooms and hallways from the total unless they have genuine business use
- A room with mixed personal/business use should have its time-based usage reflected in the hours entered
- A dedicated office used solely for business = 100% time usage
Fixed vs Variable Costs
Fixed Costs — Space (Rooms) Only
- Council Tax = Annual amount × Space %
- Home Insurance = Annual amount × Space %
- Mortgage Interest = Annual amount × Space %
- Rent = Annual amount × Space %
Variable Costs — Space × Time
- Electricity = Annual amount × Space % × Time %
- Gas = Annual amount × Space % × Time %
- Water (metered) = Annual amount × Space % × Time %
- Broadband / Internet = Annual amount × Space % × Time %
Time % = Business hours per week ÷ 168 (total hours in a week). Dedicated rooms use 100%.
HMRC Simplified Method (Self-Employed Only)
For those who prefer simpler record-keeping (not available to directors):
| Monthly Business Hours | Rate per Month | Annual Deduction |
|---|---|---|
| 25–50 hours | £10 | £120 |
| 51–100 hours | £18 | £216 |
| 101+ hours | £26 | £312 |
Source: HMRC — BIM47825. Simplified rates are unchanged for 2026-27.
Why Use the Detailed Method?
The detailed calculation typically saves 10–20 times more than the simplified method for those working substantial hours from home.
Records You Must Keep
- All utility bills for the full tax year
- Council tax and insurance documents
- Property details (number of rooms / floor plan)
- Business diary or log showing hours worked from home
- Photos of workspace setup
- Client meeting records where applicable
- Directors: formal board resolution or Licence Agreement if applicable
HMRC References (2026-27)
- Income Tax (Trading and Other Income) Act 2005, s34 — self-employed deductibility
- Income Tax (Earnings and Pensions) Act 2003, s336 — employee/director deductibility
- HMRC Business Income Manual BIM47820 — use of home as office
- HMRC Business Income Manual BIM47825 — simplified expenses
- HMRC Employment Income Manual EIM32760 — employees working from home
Example Scenarios — 2026-27
Example 1: Self-Employed with Dedicated Office (Room Count Method)
Situation: Sarah is self-employed. Her home has 6 rooms (excluding bathrooms/hallways). She uses 1 room exclusively as an office, working 40 hrs/week.
Calculation:
- Space %: 1 ÷ 6 = 16.67%
- Time %: 100% (dedicated use)
- Council Tax (£2,000): £2,000 × 16.67% = £333 (fixed — space only)
- Electricity (£800): £800 × 16.67% × 100% = £133
- Insurance (£900): £900 × 16.67% = £150 (fixed — space only)
- Total allowable: approx. £700/year
Example 2: Self-Employed — Shared Dining Room
Situation: John has 5 rooms. He uses 1 room (dining room) for business 30 hrs/week, and personally 30 hrs/week.
Calculation:
- Space %: 1 ÷ 5 = 20%
- Time %: 30 ÷ 168 = 17.9%
- Council Tax (£2,000): £2,000 × 20% = £400 (fixed cost)
- Electricity (£800): £800 × 20% × 17.9% = £28.64
- Total allowable: approx. £500/year
Example 3: Company Director — What Can Be Claimed
Situation: Emma is a director. She has 6 rooms. She uses 1 exclusively as an office, working 40 hrs/week.
What she CANNOT claim: Council Tax, Rent, Mortgage Interest, Water Rates (all fail the "wholly, exclusively and necessarily" test)
What she CAN claim:
- Space %: 1 ÷ 6 = 16.67%
- Electricity (£800): £800 × 16.67% × 100% = £133
- Gas (£1,200): £1,200 × 16.67% × 100% = £200
- Insurance (£900): £900 × 16.67% = £150 (if business use declared to insurer)
- Total allowable: approx. £483/year
Alternatively, Emma's company could pay her a use-of-home allowance under a Licence Agreement, potentially allowing a broader deduction. Seek specialist advice.
Example 4: Self-Employed with Mortgage Interest
Situation: David is self-employed. 7 rooms. Office (1 room, dedicated 40 hrs/week). Annual mortgage interest: £8,000.
Calculation:
- Space %: 1 ÷ 7 = 14.29%
- Mortgage Interest: £8,000 × 14.29% = £1,143 (fixed — space only)
- Plus standard utilities etc.
- Important: Only mortgage interest is allowable, not capital repayments
- CGT Warning: Claiming a dedicated room may restrict your Private Residence Relief when selling
Common Mistakes to Avoid
Do Not Do This:
- Directors claiming Council Tax, Rent, or Mortgage Interest
- Claiming 100% time usage when a room has significant personal use
- Not keeping supporting records (utility bills, diary, photos)
- Claiming non-metered water (unmetered water is a fixed charge and generally not claimable)
- Claiming mortgage capital repayments (only interest is allowable for self-employed)
- Forgetting the CGT implications of claiming a dedicated home office
Disclaimer & Legal Notice
This calculator is provided as a tool to help estimate allowable home office expenses based on HMRC rules for the 2026-27 tax year. It does not constitute professional tax advice. Tax law is complex and individual circumstances vary. Always keep accurate records, and consult a qualified accountant or tax adviser — particularly regarding Capital Gains Tax, company director licence arrangements, and any significant claims.
References:
- HMRC Business Income Manual BIM47820 — Use of home as office
- HMRC Business Income Manual BIM47825 — Simplified expenses
- HMRC Employment Income Manual EIM32760
- Income Tax (Trading and Other Income) Act 2005, s34
- Income Tax (Earnings and Pensions) Act 2003, s336