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 use room share × the room's business time and weekly frequency. Variable costs use room share × the business-use share of occupied time × weekly frequency.
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. A room-count allocation can be a reasonable proxy for area where the rooms are broadly comparable; use floor area instead where that better reflects the facts.
Important: Business Use
Only claim rooms with genuine, regular, and substantive business use. HMRC expects claims to be reasonable and fully evidenced. Enter the hours the room is used for business and, on those same days, the hours it is used privately. The dedicated-use setting means there is no private use; it does not mean the room is occupied by the business 24 hours a day.
How time is apportioned
Fixed costs: Business hours per day ÷ 24 × days used per week ÷ 7.
Variable costs: Business hours ÷ (business hours + private hours) × days used per week ÷ 7.
For a dedicated room, private hours are treated as zero for the variable-cost calculation. This still does not make the fixed-cost time factor 100%.
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 household cost, apportioned by room share, business time, and days used
- Electricity & Gas — Variable, apportioned by space × time
- Home Insurance — Fixed, apportioned by room share, business time, and days used
- Water (metered only) — Variable, apportioned by room share, business-use share, and days used
- Mortgage Interest (not capital) — Fixed, apportioned by room share, business time, and days used
- Rent — Fixed, apportioned by room share, business time, and days used
- Broadband / Internet — Variable, apportioned by room share, business-use share, and days used
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 business and private hours entered for the days it is used
- A dedicated office has no private hours, but its fixed-cost time factor still reflects hours occupied and days used
Fixed vs Variable Costs
Fixed Costs — Room Share × Time × Frequency
- Council Tax = Annual amount × Room % × (Business hours/day ÷ 24) × (Days/week ÷ 7)
- Home Insurance = Annual amount × Room % × (Business hours/day ÷ 24) × (Days/week ÷ 7)
- Mortgage Interest = Annual amount × Room % × (Business hours/day ÷ 24) × (Days/week ÷ 7)
- Rent = Annual amount × Room % × (Business hours/day ÷ 24) × (Days/week ÷ 7)
Variable Costs — Room Share × Business Use × Frequency
- Electricity = Annual amount × Room % × (Business hours ÷ Occupied hours) × (Days/week ÷ 7)
- Gas = Annual amount × Room % × (Business hours ÷ Occupied hours) × (Days/week ÷ 7)
- Water (metered) = Annual amount × Room % × (Business hours ÷ Occupied hours) × (Days/week ÷ 7)
- Broadband / Internet = Annual amount × Room % × (Business hours ÷ Occupied hours) × (Days/week ÷ 7)
Occupied hours means business hours plus private hours on a day the room is used. A dedicated room has zero private hours, so its business-use share is 100% when it is actually used.
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 — BIM75010. BIM47825 contains worked examples for detailed apportionment. Rates shown are the current bands used for 2026-27.
Compare Both Methods
The detailed method may be higher or lower than the simplified method. Use accurate records and choose the permitted method that best reflects your circumstances.
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
- HMRC Business Income Manual BIM47815 — apportionment principles: area, usage, and time
- HMRC Business Income Manual BIM47820 — specific home-use expenses
- HMRC Business Income Manual BIM47825 — detailed worked examples
- HMRC Business Income Manual BIM75010 — simplified home-working expenses and rate bands
- HMRC Business Income Manual BIM70040 — cash-basis finance costs (check the current treatment before claiming interest)
Director/employee note: The stricter employee rules are separate from the self-employed rules. Where the Company Director option is used, also consider ITEPA 2003 s336 and HMRC EIM32760.
Example Scenarios — 2026-27
Example 1: Self-Employed with Dedicated Office (Room Count Method)
Situation: Sarah is self-employed. Her home has 6 rooms. She uses 1 room only for business for 7.5 hours on 1 day each week. Annual costs are Council Tax £2,600, Home Insurance £580, Electricity and Gas £3,084, Water £660, and a flat Sky subscription £1,800.
Calculation:
- Space %: 1 ÷ 6 = 16.67%
- Fixed-cost factor: 7.5 ÷ 24 × 1 ÷ 7 = 4.46%
- Variable business-use share: 7.5 ÷ 7.5 = 100%; weekly frequency: 1 ÷ 7 = 14.29%
- Council Tax: £2,600 × 16.67% × 4.46% = £19.35
- Home Insurance: £580 × 16.67% × 4.46% = £4.32
- Electricity and Gas: £3,084 × 16.67% × 100% × 14.29% = £73.43
- Water: £660 × 16.67% × 100% × 14.29% = £15.71
- Sky (fixed subscription): £1,800 × 16.67% × 4.46% = £13.39
- Total allowable: approximately £126.20/year
Example 2: Self-Employed — Shared Dining Room
Situation: John has 5 rooms. He uses 1 dining room for business 6 hours a day and privately 4 hours a day, on 5 days each week.
Calculation:
- Space %: 1 ÷ 5 = 20%
- Fixed-cost factor: 6 ÷ 24 × 5 ÷ 7 = 17.86%
- Variable business-use share: 6 ÷ (6 + 4) = 60%; weekly frequency: 5 ÷ 7 = 71.43%
- Council Tax (£2,000): £2,000 × 20% × 17.86% = £71.43
- Electricity (£800): £800 × 20% × 60% × 71.43% = £68.57
- Total for these two costs: £140.00/year
Example 3: Company Director — What Can Be Claimed
Situation: Emma is a director. She has 6 rooms. She uses 1 only as an office for 8 hours a day, 5 days each 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% × 5 ÷ 7 = £95.24
- Gas (£1,200): £1,200 × 16.67% × 100% × 5 ÷ 7 = £142.86
- Insurance (£900): £900 × 16.67% × 8 ÷ 24 × 5 ÷ 7 = £35.71 (if allowable and business use is covered)
- Total allowable from these costs: approx. £273.81/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. His home has 7 rooms. He uses 1 room only as an office for 8 hours a day, 5 days each week. Annual mortgage interest is £8,000.
Calculation:
- Space %: 1 ÷ 7 = 14.29%
- Mortgage Interest: £8,000 × 14.29% × 8 ÷ 24 × 5 ÷ 7 = £272.11
- 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
- Treating a dedicated room as occupied by the business 24 hours a day
- Forgetting to reduce the claim for days when the room is not used for business
- 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 BIM47815 — Apportioning expenditure
- HMRC Business Income Manual BIM47820 — Specific home-use expenses
- HMRC Business Income Manual BIM47825 — Detailed worked examples
- HMRC Business Income Manual BIM75010 — Simplified expenses
- HMRC Business Income Manual BIM70040 — Cash-basis finance costs
- Income Tax (Trading and Other Income) Act 2005, s34
For the Company Director option only: ITEPA 2003 s336 and HMRC EIM32760 apply separate employee-expense rules.