A company can pay a director who regularly works from home £6 a week, or £26 a month, towards household costs free of tax and National Insurance, and more if the extra costs are evidenced. It can also provide or reimburse work equipment tax free. Charging the company rent for a room is possible, but the rent is taxable property income for the director and the arrangement can create capital gains tax and business rates problems.

Do the employee rules apply to a director?

Yes. Section 5 of the Income Tax (Earnings and Pensions) Act 2003 says the employment income provisions apply equally to offices, with “employee” meaning the office holder and “employer” meaning the person under whom the office is held. A director is an office holder of the company, so the homeworking exemptions and restrictions that apply to employees apply to directors in the same way.

That cuts both ways. From the 2026 to 2027 tax year, section 360B ITEPA 2003 removes any deduction for additional household expenses of working at home, so a director can no longer claim £6 a week, or actual costs, on their own tax return. Our guide on whether employees can still claim working from home relief explains the change. If the director wants tax relief on household costs, the company has to pay them.

What can the company pay for household costs?

Section 316A ITEPA 2003 exempts payments by an employer for reasonable additional household expenses the employee incurs in carrying out the duties at home under homeworking arrangements. HMRC’s Employment Income Manual at EIM01476 allows £6 a week, or £26 a month for monthly paid staff, without the employer having to justify the amount and without the employee keeping records. National Insurance does not arise either: NIM05682 confirms these payments are disregarded for Class 1.

The payment must be made under homeworking arrangements: an arrangement between the company and the director under which the director regularly works at home. EIM01472 says the arrangement need not be in writing but usually will be. For a director who is also the only shareholder, a short board minute or written policy is a sensible way to show that the arrangement exists and when it started.

The company can pay more than £6 a week if it can show the payments do no more than cover the director’s reasonable additional costs, either through a scale rate agreed in advance with HMRC or by reimbursing actual costs supported by records. Our guide to paying employees £6 a week for working from home covers the evidence in detail.

Which household costs count, and which do not?

EIM01474 lists typical additional costs: heating and lighting the work area, metered water, increased internet access charges, home contents insurance, business phone calls, and business rates where working at home leads to a liability. It excludes costs that would be the same whether or not the employee worked at home, such as mortgage interest, rent, council tax or water rates.

This exclusion is why many directors look at rent instead. A share of the mortgage interest or council tax cannot be paid tax free as a homeworking payment. If the company simply pays a household bill in the director’s name, the amount is generally taxable as earnings; see our guide to the company paying a director’s personal bills.

Can the company provide equipment, a phone and broadband?

Yes, within limits. HMRC’s employer guidance on homeworking says equipment, services and supplies provided to an employee who works at home are not taxable if they are only used for business or any private use is insignificant, which includes laptops, tablets and computers. Mobile phones and SIM cards are exempt without any need to restrict private use, limited to one per employee.

From 6 April 2026, section 316ZA ITEPA 2003 extends the exemption to the company reimbursing a director who buys qualifying items on its behalf, provided the company intends them to be used in the duties with no significant private use. Broadband is narrower: EIM01475 allows tax free reimbursement only where the director had no broadband before and needs it to work from home. Our guide to equipment provided for home working explains the conditions.

Should the company pay rent for using part of the home?

Some directors grant their company a licence or lease to use a room as an office and have the company pay rent. The company may deduct rent only to the extent the expense is incurred wholly and exclusively for its trade, under section 54 of the Corporation Tax Act 2009. For the director, the rent is property income and must be declared.

Several points reduce the benefit:

  • No property allowance. HMRC’s guidance on tax free allowances says you cannot use the £1,000 property allowance in a tax year if you have property income from a company you or someone connected to you owns or controls. The rent is therefore taxable in full, less any allowable expenses.
  • Expenses must be apportioned. HMRC’s Property Income Manual at PIM2100 explains that where part of a home is let, costs must be split between private use and rental use on a fair and reasonable basis. Costs that would be incurred anyway for private living are not deductible in full.
  • Self Assessment. Property income over £2,500 means registering for Self Assessment, according to the same HMRC guidance.

What are the capital gains tax and business rates risks?

Private residence relief is restricted for any part of a home used exclusively for a trade, business, profession or vocation, under section 224(1) of the Taxation of Chargeable Gains Act 1992. HMRC’s Capital Gains Manual at CG64663 says a room used partly for business and partly for residential purposes keeps full relief, and that the exclusive use test is stringent. A formal arrangement that gives the company exclusive use of a room can therefore expose part of the gain on a future sale to tax. See using part of your home for business: the CGT effect.

Business rates can also arise. GOV.UK guidance says you do not usually pay business rates if you use a small part of your home, such as a bedroom office, but may if the property is part business and part domestic, customers visit, staff work there, or the home has been altered for the business. A formal letting may also need consent from a mortgage lender or landlord, covered in running a business from home: legal permissions.

How do the options compare?

Illustration only. Sam is the sole director of her consultancy company and works from a spare bedroom four days a week. The company pays her £26 a month under a minuted homeworking arrangement: £312 a year, with no tax, no National Insurance and no reporting. It also buys her laptop and desk, which are exempt because private use is insignificant.

Her accountant suggests the company also pays £1,200 a year rent for the bedroom. The company may claim a deduction if the rent is wholly and exclusively for its trade, but Sam must declare the full £1,200 as property income, less a fair share of costs, and cannot use the property allowance. If the room is used only for work, part of any gain when she sells may lose private residence relief. The £26 a month payment is simpler and has none of these side effects, so the rent route needs a clear reason to justify it.

What mistakes come up most often?

  • Paying a homeworking allowance with no record of the arrangement, or to a director who rarely works at home.
  • Paying more than £6 a week with no evidence, so the excess is earnings that should have gone through payroll.
  • Treating mortgage interest, council tax or a share of rent as tax free homeworking costs.
  • Charging rent without declaring it, or claiming the property allowance against it.
  • Giving the company exclusive use of a room without thinking about private residence relief.
  • Continuing to claim the £6 a week deduction personally for 2026 to 2027.

For the wider set of obligations a director carries, see directors’ tax responsibilities.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.