August 22, 2025

Should You Build a Garden Office? ( And What HMRC Thinks About It )

Working from home has its perks, no commute, slippers all day, and the kettle is always within arm’s reach. But there’s a downside too: the dog barking during Zoom calls, the kitchen calling your name, and family members who think “working from home” means “available for random chats.”

Enter: the garden office. A shiny little hut at the bottom of the garden that whispers, “You’re professional now.” But before you start pricing up timber frames and fairy lights, let’s talk tax.

Spoiler: HMRC isn’t as excited about your fancy shed as you are.

1. The Build: Not as Tax-Friendly as You Think

You might think your company can claim the full cost of building your office. Sadly, HMRC says “nope.” They see it as a capital expense (translation: a long-term asset, not an everyday cost).

No Corporation Tax relief on the actual structure.
Structures and Buildings Allowance won’t usually apply if it’s on residential land.

So yes, the company might pay for the build, but it won’t shrink your tax bill. Sad face.

2. The Good News: Fixtures & Fittings Do Count

Cheer up, because while the walls don’t count, the stuff inside might. Think:

Wiring and lights so you’re not working in the dark.
Heating so your coffee doesn’t freeze mid-meeting.
Furniture (yes, even your desk chair that squeaks).

These may qualify for Capital Allowances like the Annual Investment Allowance (AIA). Pro tip: get your builder to give you an itemised bill, otherwise it’s like HMRC’s version of “mystery meat” at the school canteen

3. Ongoing Costs: Deductible (Mostly)

The running costs of your new empire can often be claimed, including:

Electricity and heating (a fair split if you share supply with the house).
Repairs, because storms happen.
Business internet (but not Netflix, sorry).

⚠️ If the company pays but you own the property, set up a proper rental agreement. Otherwise, HMRC might label it a perk, and nobody wants a surprise tax bill dressed up as a “benefit.”

4. The Personal Use Trap (a.k.a. Benefit in Kind)

If you sneak into your garden office for yoga, gaming, or hiding from the kids, HMRC may view it as a Benefit in Kind. Translation: tax.

They’ll usually calculate this as:

20% of the building’s market value when first available, plus
A slice of running costs.

That means extra Income Tax for you and more National Insurance for your company. Basically, your “man cave” could become HMRC’s happy place.

5. When You Sell: Capital Gains Tax Could Bite

Use your garden office 100% for business, and part of your home might lose Private Residence Relief when you sell. Hello, Capital Gains Tax.

But if the office is removable, or you also use it personally, you may keep your full relief. With allowances dropping to £3,000 from 2024/25, this is one tax bill you don’t want sneaking up on you.

6. VAT: A Bit of a Balancing Act

If you’re VAT registered:

You can reclaim VAT on build and kit-out costs, but only for business use.
Any personal use means you’ll have to reduce the claim.
On the Flat Rate Scheme? Tough luck, you probably can’t reclaim it at all.

7. Other Things People Forget

Insurance: Tell your provider. Otherwise, your “office” may be classed as “a very expensive shed with a laptop.”
Planning permission: Don’t just assume. Councils love red tape.
Mortgage terms: Some lenders don’t like you running a business from home.
Business rates: Possible, depending on how official the office looks.

8. Alternative Hack: Build It Yourself, Rent It to the Company

Sometimes it’s easier for you (personally) to pay for the office, then lease it back to the company at market rates.

The company gets a tax-deductible expense.
You declare the rent as income but can offset costs.
Fewer headaches around BIK and CGT (in many cases).

Just remember: the rent is taxable. And no, the Rent-a-Room scheme doesn’t apply (unless you’re planning on letting out your office on Airbnb, in which case… bold move).

The Bottom Line

Garden offices are brilliant for productivity and peace of mind, but when it comes to tax, it’s more “murky puddle” than “crystal-clear pond.”

Key takeaways: