Family-friendly accountant Amy Taylor explains to do’s and don’ts when claiming business expenses for working from home.
If you use part of your home for business, you can offset utility expenses and mortgage interest against your income – but beware of Capital Gains Tax implications!! Say you use 1 of the 6 rooms in your house solely for business and claim one-sixth of all your utility bills and mortgage interest as an allowable expense, when you come to sell your house, one-sixth of any gain you make on the sale of the house could be subject to capital gains tax at 18%. There are allowances that could reduce the amount of any capital gains tax to pay depending on your circumstances and you should consult an accountant for more details.
A more common scenario is that you use part of your house for business, part of the time. For example, you use the dining room during the day, and the family eat there in the evening. In this case, you will only claim a proportion of the costs of using that room and therefore will not suffer Capital Gains Tax on the sale of your house. HMRC have given us some examples of how to calculate how much of your utility bills and mortgage interest (not capital) that can be offset against income at http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm. These calculations are based on the amount of the house used for business, and the amount of time the room is used for business.
If there is only minor use of your home for business, e.g. writing up your books, you can put in a reasonable estimate, currently £3 a week, or £156 a year, excluding any periods where you are on holiday without risking investigation by HMRC.
You can also claim business expenses for working from home if you are employed, but there are many rules surrounding this, such as you having no other option but to work from home, for example if your employer is in Germany and there is no UK office, etc,.
For any further guidance on accounting and taxation services from a family friendly accountant, please email firstname.lastname@example.org. Amy is based in Potton, Sandy, Bedfordshire, but also deals with clients across the UK remotely.
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