Taxed more for working at home?

Skyhigh

I'm employed full time, but I'm looking at going self employed in addition too - as I can earn money on evenings or a weekend doing my own work.

I'll be doing PC based work, so when at home I'll be using my home PC, and I also work on the train too (laptop).

Someone said that if I was self employed and I worked from home, I had to declare any rooms in the house that I used for 'working in', and pay additional taxes/amounts.
I can't find anything about this on HMRC site, or Google.

I won't be using any part of my house as an office or really a 'base' for work, I'll simply be using my home PC to do work on from time to time.
[Most of the work I do is on the train....which means, if I *do* have to declare where I do work, how do you declare a train carriage on a 7.27AM service...??]

Anyone heard anything about this before?


:!:

Murdina

I think what they are getting at is twofold.

Firstly, if you were to set aside part of your house and use it solely for your business (and in my view we'd have to be talking more than a home office here - maybe a treatment room if you were some kind of therapist or practitioner or something like that) then when you came to sell that part would not be covered by principal private residence exemption from CGT but instead on that part you would be due to pay CGT.

Secondly, but again I think only in the dedicated set aside situation, you may be liable to pay business rates on that room, not council tax.

Doing some kind of self-employed work from home in the way you describe I do not think is caught either way. HOWEVER you must register as self-employed within 3 months of starting - have a read through various threads on this forum about starting up a small business.

You should also inform your house insurers.

duchy

Of course if you use an area of your home solely for your business you also can claim a proportion of expenses against your earnings (eg heat & light in your home office) if you are self employed so it can work for or against you depending on your circumstances.

Skyhigh

Thanks guys, that makes much more sense!

I'll try and look into it some more, specifically whether the area has to be 'solely business', since as I said - I'll just be using my home PC for a few hours a week as I do most of it on the train, and the room definitely will not be dedicated solely to work.

I've been reading up on the other threads too, since I want to get everything right especially with the tax issues, etc.

:!:

aj76

This tax benefit is really difficult to work out, and HMRC can still say no!

I am working from home and have been trying to sort this out for nearly 5 years!. You have to count the number of rooms that are NOT kitchens or bathrooms say you have 3 bedrooms, WC upstairs and down and a kitchen, lounge and dining room that that would be 5, you get allowance on one of them so 1/5 if you had same situation with 4 bedrooms it would be 1/6 and so on. So with the 1/5 example that would translate to 20% but this only covers the additional costs incurred so you have to prove to HMRC how much the cost of your gas and electric has risen as a result of home working so say they increase by £100 per quater on average that would be an annual increase of £400, only 20% of this would be tax deductable so £80, trust me its a real pain in the neck!

chappers

I claimed £425 last year for using my spare room as an office, even though it's not my main line of work and only ancillary to my business.All done straight above board by my accountant.

Murdina

aj76 sounds to me like you have been led down the garden path a bit by HMRC. You are fully entitled to claim ANY increase in electricity etc which you can evidence arises because you run your business from home. The formula by reference to rooms is a rule of thumb, not set in stone in the law, which simply says that someone who is self employed can claim any expense wholly & exclusively for the purposes of their trade. The problem is proving how much electricity and so on is due to the business.

If your bills are genuinely £100 higher because you work from home, then claim that on your self assessment form. Don't ask them about it and don't debate it unless and until you are the subject of a formal enquiry.