Self assessment - council tax

asy1mpo

Hi

Filling out my self assessment. First time done it as business only been going for about 18 months. I am a web designer and work from home.

I have found all the info about what can be claimed as expense - e.g. telephone, broadband, (heat/light/power), etc.

It mentions that can claim on council tax (this page - http://www.hmrc.gov.uk/MANUALS/BIMMANUAL/BIM47820.htm)

Has anyone done it before?? Do you work it out in similar way to broadband and electricity and work out percentage of property uses for "home office" space??

Thanks

PlutoinCapricorn

Yes, it does seem strange iit is possible to claim this: the more you work at home, the more electricity you will use whereas you pay the same amount of CTAX no matter what.

But HMRC themselves permit you to include it in your expenses, and you work at home so just work out a percentage, the same as the other domestic running costs.

fuzzball172

yes I run a home office and spend a good percentage of my time there, I claim 10% of house running costs. My reasoning is that if I had a normal office, I would claim 100% of those costs, so its cheaper all round for me and the HMRC

fengirl_2

The use of a room at home is calculated by taking the total number of rooms in the house (less kitchen and bathroom) and dividing by the number of rooms used for work. You multi[;y this by your whole household running costs: mortgage interest or rent, CT, insurance, utiltites, etc.

asy1mpo

I only live in a small 1 bedroom flat. There is bedroom, bathroom, hall, kitchen and lounge.

I work in the lounge where I have a desk. Part of time used as office, part of time of course used as a normal lounge.

How would this change things for working out the electricity, power, council tax etc ??

Am I right in saying mortgage interest can only be claimed
if have seperate room as solely business.

Like I said I work from my lounge which is sometimes used as a normal lounge

PlutoinCapricorn

Is the self employment your only source of income, or do you do it in your spare time?

If SE is all that you do, then as a web designer you must spend hours online at home so perhaps 20% of the CTAX is reasonable.

You need to be able to justify the percentage of each expense in case of an investigation: 90% internet costs might be reasonable in your case.

It is important to bear in mind that the expenses help to reduce your income so that you pay less tax, but if you do not earn enough to pay much tax then they have little effect.

I am not sure about the mortgage interest: having a separate room would help. Having a separate area of the lounge that is obviously an office might be allowed.

negg

It is fair that you can claim for some of these things. For example, I have a two bedroomed house. One bedroom is an office, you cannot fit a bed in there, it is 100% work. So now I have a one bedroomed house but paying council tax for a two bed.

In my case I lose that room 100% of the time and there are four rooms in the house. This gives me 25% to put down as business expense.

That's 25% against gas, electricity, council tax, mortgage interest (note interest, not repayment), water bills and house insurance.

Note that if I could use the room for personal use say 50% of the time, that would be only 12.5% I would be able to claim.

Also, note that this law was only changed for the current tax return (Apr 08-Mar 09). Claiming before this was not permitted.

fengirl_2

Negg, its not true that the law on use of home for work has recently been changed. It has always been the case that home workers could include a reasonable proportion of their household running costs in their accounts. The bit of law which relates to this states anything incurred wholly and exclusively for business goes in your accounts - its nothing new.
In the real world, no inspector is going to be looking for adjustments on tiny items like use of home as office, so just include what is reasonable.

grey_lady

You may also be liable for business rates and capital gains tax on selling your property.

IMHO - I think you should talk to an accountant, a good accountant will save you more money then they cost you.

fengirl_2

It is highly unlikely that the LA will try and impose business rates on a house where the spare room is being used for business!
As far as CGT is concerned, in 26 yrs I never saw a case where a CGT charge arose as a result of using part of a residence for business. The time involved and the small proportion of the property used would make the charge infintessimal. And if you dnt use your home for business, what is the alternative? You would need to rent premises elsewhere which would involve leases and be much more expensive.

fuzzball172

When I contacted my local council about working from a home office. Their offical reply was that as long as my work had no impact on my neighbours, or required changes to the outside of my house, or that it required customers visiting my house, there was no requirement to apply for planning permission for a change of use to comercial property. What they basically seid was that as long as I was not going to block the road with customers parked cars or turn my house into a shop, they were happy for me to run a business from home.

for the offical HMRC rules on apportioning home expences see this page http://www.hmrc.gov.uk/manuals/bimmanual/BIM47815.htm