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Running a business from home?

Source: HM Revenue & Customs | | 22/08/2017

Anyone running a business from home should check if they need permission to do so: from a mortgage provider or landlord. Your local council may also need to be notified, for example, if you need a licence to run a home-based business. Running a business from home may also create a charge to business rates and might affect property insurance costs.

Other business costs you may need to consider include:

  • Home based business insurance to cover Employers and Public Liability and any business equipment, and
  • You may need professional indemnity cover.

HMRC will have no problem if you claim a proportion of household expenses, but the calculations involved can be subjective: how much space is taken up by your business, how long do you spend working at home each day, what are your monthly household costs? As a workaround, HMRC has a fixed rate allowance that you could use instead of plowing through endless calculations. If you work more than 25 hours a month from home you could claim:

  • 25 to 50 hours a month - claim £10 per month
  • 51 to 100 hours a month - claim £18 per month
  • More than 100 a month - claim £26 per month

Depending on your monthly household costs, claiming these fixed rate allowances may be short-changing your option to claim a realistic proportion of your actual costs. The only way to see which is more beneficial is to work out the alternatives.

Planning note:

Clients often ask if claiming for business use of home costs will result in a charge to Capital Gains Tax when they sell the property. There is a risk, but it can be avoided if you ensure that the space you designate as a home office doubles as a hobbies room, or space to store your golf clubs. The key is to demonstrate that the area has a duality of use: business and private.

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