Running a Business From Home - Tax Advice

Mcford_2

Hello Money Savers!!

I am hoping to start running a small business from a spare room at home - buying a relatively specialist product wholesale and then repackaging and deliving to the door by post.

I hope to run this business in conjuction with my full time job. I am not planning to make tens of thousands pa - but just a small venture to supplement our income and give us a little more security. As I said the product is quite specialist.

I live at home with my wife who is also in full time employment and our current combined gross household income is £58,000 and is evenly split between the two of us.

I would welcome your views on whether either of these two scenarious would have a tax saving for us? Or would the tax burden (in the end) be the same?

1. The business operates free from the spare room in our house without paying any rent. This would obviously increase profit and tax paid annually.

2. The business pays the household a rent for the use of the spare room. This would reduce annual profit margin and the tax to be paid annually by the business. We would then personally have to declare and pay tax on that income.

Any thoughts would be most welcome.

THanks

Mcford

heretolearn_2

2 sounds good in theory, doesn't it, but it can bring in a lot of other factors. You may be effected by:

Capital gains tax on the business part, when you sell your house.
You would then have an income as a landlord, which also needs to be declared/taxed.
Effect on mortgage/insurance.

It'll only work with a Ltd company, not sole trader, which again if it's only a small business with small income I wouldn't recommend the Ltd route.

People do it, but it needs to be well thought out and for micro businesses I don't think it's worth the risk/hassle. On a small scale it usually it doesn't actually result in much or any real savings to be honest, not it you do it all above board, and pay your rental income tax, pay your business premises insurance etc.

rugbyfan100

Unless you are making loads you will not have to be much if any corporation tax as a LTd company. I would then pay yourself a small salary and dividends to maximise your personal tax return

PlutoinCapricorn

Have you read through https://www.businesslink.gov.uk?
https://www.ukbusinessforums.co.uk is another good site.

The standard advice to anyone starting a small business in addition to a PAYE job is to start small as a sole trader, and only incorporate if and when you earn enough to make this advisable. The exception might be if you are spending a lot of money and might get into debt.

What are the rules for where you live? Health & safety, nuisance and inconvenience caused by deliveries need to be considered, as does insurance.

Mcford_2

Thanks Folks. I suspected it was going to turn out that there would be little saving involved but I'm glad people agree and the sole trader route appears to be the best way forward.

Luckily enough my day job is as an environmental health officer so the H+S, nuisance issues etc should not be much of a problem and if they are i'm definately in the wrong trade!!

Many Thanks,

Mcford