Last updated: 16 October 2026
The question
My energy bills have soared since I started using a room in my home as the base for my company’s business. I’ve heard my company can pay up to one third of my gas bills tax-free. Is that true?
The short answer
No. There is no rule that lets a company pay a fixed one third of a director’s gas or electricity bills tax-free. If your company simply pays a share of your household bills, it is a taxable benefit, or earnings if it is reimbursed in cash. There are, however, two legitimate ways to get tax relief.
Option 1: The home working allowance
Your company can pay you up to £6 a week (£26 a month for monthly paid staff), £312 a year, tax-free if you work from home under a homeworking arrangement. You do not need receipts for this amount. The company can deduct it for corporation tax.
Option 2: Reimburse actual additional costs
The company can pay more than £6 a week tax-free if you can show the extra household costs caused by working at home. “Extra” means the increase in costs, such as more heating and lighting during working hours, not a share of the whole bill. Keep a reasonable calculation, such as comparing bills before and after you started working at home, or a metered estimate.
Option 3: Rent a room to your company
Some directors grant their company a licence to use part of their home and charge rent. The company deducts the rent. You declare the rent as property income but can deduct a fair share of household costs, so the taxable profit is often small.
| Method | Tax-free for you? | Deductible for the company? | Paperwork |
| £6 a week allowance | Yes | Yes | Minimal |
| Actual extra costs | Yes, if evidenced | Yes | Calculation needed |
| Paying a share of bills directly | No, taxable | Yes | Benefit reporting |
| Rent under a licence | Taxed as property income, less costs | Yes | Written licence, property income on return |
Example
Daniel’s annual gas and electricity bill rose from £1,800 to £2,400 when he started working from home full time. The £600 increase is the additional cost. His company can reimburse £600 tax-free with his calculation on file, instead of £312 under the flat rate. If it paid one third of £2,400 (£800) without evidence, the excess would be taxable.
Capital gains tax points
If a room is used only for business, part of your gain on selling your home may lose Private Residence Relief. Using the room for some private purposes as well avoids this. Business rates are rarely an issue for a home office used part-time.
Self-employed instead?
Sole traders cannot use the company rules. They can use HMRC’s simplified flat rates for working at home (from £10 to £26 a month depending on hours) or claim a proportion of actual costs.
Frequently asked questions
Can I claim working from home relief from HMRC myself?
Not any more. The employee tax relief claim for working from home ended on 6 April 2026, so the company route is the main option.
Does the £6 allowance need a written agreement?
A homeworking arrangement should be agreed and recorded, even if informal.
Can the company pay my broadband?
If the contract is in the company’s name and mainly for business, yes.
Is the rent subject to VAT?
Not usually, as residential licences are exempt.
Related: use of home calculations, working from home relief and home office repairs.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with director home office costs. See our limited company accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
