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If you work from home, what do you deduct as an expense?(32 Posts)
Ie expenses. How do you work out what to deduct, if anything.
Have gone blank on what you do.
There's so much to remember to include. Found a useful document regarding working from home
MrA- you really confused me putting 60/63 because to me that looked like a fraction.
Xenia- I thought the whole point ( correct me MrA if worng) of saying that any room was used for other things apart from the business was the way to avoid capital gains? It's only if a room is used exclusively for a business that you could be liable.
And another question- how would anyone know if you wre working from home- even sticking stamps on envelopes in a tiny room for that purpose?
a) I've done all but the last three tax returns - and any fool who drops off their records after Christmas pays me double.
b) read this before asking any more questions (feel free to print it and use a highlighter)
"Do we know anyone charged capital gains tax on a house sale who eg was a writer working from home or maths tutor?"
No, most of the case law concerns lawyers - because they self-represent they are the only ones that can generally afford to take appeals beyond the First Tier Tribunal.
"I think most people manage it pretty well without accountants and things are never as complex as people make them seem."
Depends what you mean by "manage it pretty well" - file a tax return that is accepted on time maybe, pay no more tax than is necessary probably not. If MrsJimmyChoo pays tax at 20% (and Class 4 NI at 9%), her version of the calculation ends up with her paying £170 more than she should be!
"I don't understand your 60 hrs/ 63 hours- there are 24 hrs x 7 days in a week- not 63hrs"
Yes there are 168 hours in a week, but this room is only being used for 63 of them.
mrsJimmy you can file your return earlier and still pay your bill at the end of Jan - you don't have to pay when you file. Avoids the last-minute panic and means you know exactly what you owe as well.
Not that I've ever managed it but I imagine that must be helpful
I think most people manage it pretty well without accountants and things are never as complex as people make them seem.
Also I suppose with house pricing dropping for some and a lot of negative equity about you might want part of your sale price to be classed as a capital sale and claim capital losses actually against any capital gains (although I agree that over time it ism ore likely you would make a gain). Do we know anyone charged capital gains tax on a house sale who eg was a writer working from home or maths tutor? In theory they ought to be charged but are they?
The only benefit I can see is that George Osborne gets my money earlier rather than it being in my bank account for as long as possible.
I don't understand your 60 hrs/ 63 hours- there are 24 hrs x 7 days in a week- not 63hrs. People who are s/e tend to work most days - I do- and don't just do 9-5 x 5 days a week.
"why aren't you madly at work doing tax returns?"
Because I point out to my clients the benefits of filing their tax returns earlier in the year and work with them to achieve that
@MrsJimmyChoo @THERhubarb that is nearly there, you need one more step.
So with MrsJimmyChoo's figures, she uses the study for 60 hours each week exclusively for a business purpose. From the 95% given I assume she uses it 3 hours for a non-business purpose. This may not be enough to prevent the room from being excluded from Private Residence Relief which may result in a large Capital Gains Tax liability, but ignoring that for the moment this indicates that the costs relating to the room (1/7 of the total costs for the property that can be allowable expenses) can be apportioned 60/63 as to business use.
Just for the record MRV- are you an accountant? And if so why aren't you madly at work doing tax returns?
@Xenia you only have to break down your expenses into categories on the tax return if you earn over £73,000. But the categories are VERY unhelpful - they are not designed to prompt you as to what you can claim, they are designed to highlight to HMRC certain expenses that they may want to investigate further! So if accountancy, legal and other professional fees are relatively high this might indicate that there are some legal fees realting to a capital item which should not be claimed, car, van and travel expenses may include non-business travel or private car expenses etc., but costs of goods bought for resale or goods used isn't usually worth looking at. But where do you put common business expenses like advertising or delivery charges? Where does a builder put subcontract costs which may be 90% of her total costs?
No idea Choo old pal. I am shit at maths.
I got that advice free from an accountant. It was simple enough for me to understand.
If I try and do your maths I would get a headache.
There are benefits you see, to not earning enough to pay tax in the first place. One of which is I don't have to do all these complicated workings out. But I did for one year and I managed just fine so if someone with number dyslexia can do their own accounts, so can everyone else.
TheRhubarb- that sounds a conservative figure. If I add up our council tax, water rates, house insurance,mortgage interest, gas and electric it comes to over £7K.
I am working on the basis that I work a 10 hr day for 46 weeks of the year, minus 52 days (Sundays)
I am calculating on the basis that 1/7th of my house is used for work, ( 4 beds 3 receptions) and the room is used by me for 95% of the time- as a study and a book store/library for rest of family.
I am calculating the daily 24 total for all of the above household expenses then dividing that by the number of hours I work in a year.
is that okay
Yes, the HMRC guide is worth starting with. The point above about capital gains tax is good and also working out what % of your house is for work.
Also look at the lists on the self assessment tax return which ask you to list expenses in certain categories (I think it is more detailed once you earn over a certain amount) and they ask for the sums for business travel/car, work insurance policies, heating, lighting, stamps. We have a separate work internet line/account and telephone and fax line here so those are just for work. You might pay people to do some things for you to do with work. You might subscribe to work journals on chemistry or whatever your expert field is etc etc.
Deduct anything that you have to pay for to be able to run your business. I think you are allowed to deduct a percentage of your utility bills gas, electric phone etc as you are using these while working from home.You are also allowed a certain amount for wear and tear on your home. The best thing to do is to contact the C.A.B if you are unsure about anything.
Thanks everyone, really helpful.
I don't earn enough to pay tax anyway
Depends what you work as.
I'm a freelance copywriter. I claim just for the electricity I use.
What you are supposed to do is calculate the total cost of running your home. So how much do you pay each year for your mortgage/heating/water/council tax/insurance. Say this is around £3k a year.
Now add up all the rooms in your home. I have 6 rooms and I work in the living room so I take up around 10% of the house.
10% of £3k is £300 so you can claim £300 for expenses.
When claiming expenses for a business you run from home however, be careful. If you have an office that you work from then this may affect your insurance and you could be liable for capital gains tax should you sell your home. The room where you work must also be used for other purposes. So I work in the living room which is obviously a communal room and not used exclusively for my business.
You can also deduct admin fees for printing stationery for example, business cards and part of your phone bill. Same goes for computing and repairs. Any expenses related to your business can be deducted.
See the HMRC guide on this.
Oh I also claimed for laptop repairs and new laptop (there is an allowance for capital purchases up to a certain amount)
I was quoted £300 last year. I did it myself! I don't earn enough to justify it tbh and dh's accountant checked it over for free.
I do some freelance consulting and claim business related phone calls, travel expenses for client meetings, stationery (inc printer ink). Professional fees & insurance if you have any. Also on the advice of an accountant I claim a flat rate of £5 per working day to cover other utilities.
It might be waaaaaaaaay out to you but I can name people- friends- who pay that. I'd have guessed most accountants would charge £50 an hour?
Jimmy that figure is waaaay out. I paid £100 for my first tax return (when I really didn't know what I was doing) and £30 this year when all I needed was a twenty minute slot to ask specific questions. Worth it for the peace of mind imo.
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