Working From Home - Our 3 Favourite Tax Saving Tips
Do you have your own business?
Are you working from home?
Many businesses start in a spare bedroom or even on the dining room table.
Even when they're well established, most business owners work from home at least part of the time, during the evening or on weekends.
There working from home means you can claim part of your household costs for tax purposes.
But who can claim, how much and which costs?
What Is Working From Home?
Almost everyone in business can make some claim for ‘working from home’.
We don't know any business owner who doesn't at least take some paperwork home or make business calls from home.
Imagine you're a sole trader running a small garage. You need to renew your business premises insurance. You take the proposal form home to complete after work. You've just used your home for business and you are entitled to make a claim for working from home.
It constantly amazes us how many people think they're not entitled to the ‘use of home’ deduction. There are so many popular misconceptions about it.
Many people think they can't claim because they're already claiming for an office, a shop, or other business premises. This is not true! Although the amount of the claim is likely to be less, a ‘use of home’ claim is still possible as long as some work is carried out at home.
Our 3 Top Tax Tips For Working From Home!
- Calculating proportion of business use - take the number of rooms used for business and divide by the total number of rooms (less hallways, bathroom and kitchens!).
- Allowable costs include - Mortgage interest, council tax, water rates, repairs and maintenance, building and contents insurance, utilities, cleaning etc.
- Costs which are specific to an area which is used exclusively for your work may be claimed in full.
Our 3 bonus working from home tips are:
- Capital allowances may also be claimed on any furniture and equipment used for business, with immediate 100% relief from the annual investment allowance.
- Specialist equipment installed in a home office which might consume higher proportions of utilities (such as lighting) should be reviewed regularly to see if higher savings can be claimed.
- Consider using wasted rooms for business to up the proportion of household costs you can claim (see first tip).
There are some simplified flat rate allowances that are allowed by HMRC which might be suitable in some simplified cases - such as a landlord with one rental property to manage. Ask us for a review to see what is most appropriate for your business!
There is a small caveat with all these rules regarding working from home claims impacting future principal private relief on capital gains tax if you were to sell your home. Again, ask us for a review to see what is most appropriate course of action for your business.
Our Working From Home Call To Action
If you know of any other great working from home tax tips that can be shared with our readers then let us know via the comments or through LinkedIn.
Don’t be shy about claiming or using your legitimate working from home expenses from the tax man - good for you, your bottom line and your business!
The PJW Call To Action
If you want to talk to us about using more of our top tax tips to help your business save real money then do the following:
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Remember - Don’t Leave a TIP with the Taxman!