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Mortgage when running a business from home

(21 Posts)
ReverseTheTrend Fri 02-Jan-15 11:09:17

I would be most grateful if anyone can help

We have a mortgage and are one year into a fixed rate period of three years.

DH plans to give notice to his employers and set up his own business of which he will be sole employee. He will run it from our spare room

Do we need to notify the mortgage company? I thought we would have to if running a business there, but on the other hand the majority use of the building will still be residential. There is nothing in the terms and conditions that mentions it.

caroldecker Fri 02-Jan-15 11:40:02

May also need planning permission

ReverseTheTrend Fri 02-Jan-15 12:02:28

hi carol, we spoke to council, not needed on that front as no change to primary use of house

ReverseTheTrend Fri 02-Jan-15 15:09:56

Bump

TalkinPeace Fri 02-Jan-15 15:31:57

No.
So long as no room is used exclusively for the business and you are not trading from the house
- trading would mean having steady streams of customers coming to the door to collect stuff, or parking 16 used cars along the road outside

neither the council nor the mortgage company will give a stuff

I assume he'll be a sole trader at the outset rather than a Limited Company

have a read through my old ebay Me page which is now stored here
talkinpeacemepage.wordpress.com/2014/09/10/the-talkinpeace-me-page-as-it-was-before-being-evicted-by-ebay/

morethanpotatoprints Fri 02-Jan-15 15:39:37

Hello OP

We have a Ltd company that we run from home and it involves one room downstairs.
We do have people visiting the premises although not that many and we have had no problems.
If you find a good accountant they are worth their weight in gold and will tell you about what you can claim for against your tax.
For example we receive some of our utilities tax free as we use the room for sole purpose of business.
I think it depends on the business as well, but if basically office there shouldn't be a problem

TalkinPeace Fri 02-Jan-15 15:43:15

morethan
as we use the room for sole purpose of business.
be very, very careful if you do that - there are CGT implications on rooms used solely for business.
On the accounting forums the advice is always to have something domestic, like the ironing board, in any such room.

PS : I've run businesses from home for the last 17 years
My clients turn up at all sorts of odd hours!

ReverseTheTrend Fri 02-Jan-15 15:49:06

Thank you so much, it is the spare room and so has a bed for guests in there and all sorts of tat. No one would be coming to visit and no stock, so sounds like we are ok

Thanks again

morethanpotatoprints Fri 02-Jan-15 17:44:42

Thanks talkin, will remember that.
I think our accountant said its only a little bit back, but every bit helps.
Something about gas bill for heating divided by how many rooms with a radiator or something like this.

Now, I just have to find somebody to explain dividends to me, our accountant will charge. Must find a new one.

TalkinPeace Fri 02-Jan-15 17:53:12

Dividends are easy.

In a limited company, they are the way that after tax profits are returned to shareholders.
In a one man band company, those shareholders are likely to be the main worker, their spouse and possibly children.
You can either have lots of classes of share - one per person, or just alter the number of shares issued.

Company has turnover and expenses .... one of those expenses being directors salaries. The most tax efficient is to make that salary be £1 less than the ERS NI limit : and report under RTI

the net profit, after salaries then gets taxed
the after tax profit is either held for future investment or distributed as dividends
which go on the shareholders tax returns tax paid

but yes, you prob need a new accountant if they are not supporting you closely through this stage
there are lots of us out here - its a clients market
and no, I do not tout for work under this name, ever

morethanpotatoprints Fri 02-Jan-15 20:46:43

Thanks Talkin.

Our accountant is good I think, but all of a sudden her costs have gone up and whereas we could ask her questions and if it was a quick answer she wouldn't charge now she is.
I understand if it takes time and its a question that needs her to access our accounts but sometimes its a quick yes or no.

Do dividends count as personal income if you don't take them out of the company? Yes/no would prob cost me £25, but she has just had a new house built from scratch and the pics are lovely. She moved to a very expensive part of the country too. grin

TalkinPeace Fri 02-Jan-15 20:54:31

morethan
If the money stays in the company bank account - not as declared dividends to the shareholders it is NOT their income.

When the divi is declared and paid it becomes the income of the shareholder.

So its quite easy to plan your income effectively with the dates of dividend declarations smile

morethanpotatoprints Fri 02-Jan-15 22:08:05

I love you talkin.
I really do x
I feel I should pay you now.
You can't believe what good news this is for us.
xxxxxxxxxx thanks

TalkinPeace Fri 02-Jan-15 22:15:23

Morethan
No worries.
Its all stuff I hold in my head - and if I can set people straight on the easy stuff I get paid to play with the interesting stuff

like deciding on the mix of shares and chosen dividend dates wink

eg
a client / friend has a highly paid job so has left all the income of his company in there, waiting to pull it out in a year when he has no other income

morethanpotatoprints Fri 02-Jan-15 22:21:38

I get you. I'm sure we have done similar with instruments in terms of depreciation, i believe.

Thanks again, you are a star and very clever.

Reverse

Good luck and hope it all goes well for your dh.
Maybe you could be a Ltd company and you be secretary and director, a savvy move maybe for your future.

toomanyeasterbunnies Fri 02-Jan-15 22:55:11

If you will be helping your husband with the business then make sure you also draw a small salary. My Dh and I have a salary of £10k. We are both share holders with 50% stake each and draw up to a max of £30k each in dividends. This means our joint income can be £80k without having to pay tax. Also be aware that if you end up paying tax then you will have to pay the following year's tax upfront.

Also, on the home office expenses front you can claim a flat rate £4 per week for expenses at home. You can also claim additional expenses if they are incurred wholly and exclusively in the course of business. This link explains it well. www.companybug.com/home-office-expenses-limited-company/

TalkinPeace Fri 02-Jan-15 22:59:35

This means our joint income can be £80k without having to pay tax.
No, because the Dividends were taxed at 20% before they left the company.

Also be aware that if you end up paying tax then you will have to pay the following year's tax upfront.
No, that only kicks in when your personal tax bill goes over £2000 a year

ReverseTheTrend Sat 03-Jan-15 10:14:19

sounds like we need to chat to the accountant

I cant work for the business as my contract with my job forbids it

if he wants to pay himself in dividends though, won't that mean he can only take it once a year? And also I thought only an option for ltd company and atm plan is to be a sole trader?

TalkinPeace Sat 03-Jan-15 10:38:28

reverse
Do not worry about you working for the company : that is just for maximum tax efficiency. and the bit that HMRC get most funny about

Dividends can be voted at any time, interim dividends could be weekly if you could be bothered with the paperwork

And yes, you are better off a sole trader at the outset as its so easy to get going.
The tax advantages of Ltd kick in at net profit of around £30k
and its amazing how low a net profit can give a comfortable living wink
because of the class 4 NI hit on self employed earnings

you NEED to talk to your accountant - to get proper advice based on your real numbers.
It will pay off. promise

ContentedSidewinder Sat 03-Jan-15 19:00:20

I am in no way as knowledgeable as Talkin but toomany it depends what you do for the company and whether your salary reflects that.

ie I do the books for Dh but I don't draw any salary as it takes me 20 minutes each month (I fill in a spreadsheet for the accountant) he is the sole earner for the company and gets a salary plus dividends. He draws down dividends whenever he needs to, not yearly or monthly.

HMRC are pissed off to high heaven over income splitting/income shifting and will desperately try to get the law changed (only saved by a change in government.)

There was a case involving Artic Systems that went through the courts and it was all to do with the type of shares you hold. This may be irrelevant but it might be worth a look at this from taxation.co.uk on the cases that HMRC took to court.

Reverse re council tax, as long as the room has other uses then you are free and clear of business rates. (I used to work in council tax)

ContentedSidewinder Sat 03-Jan-15 19:03:28

Posted too soon, forgot to say we came to the end of a fixed rate and we were advised by our mortgage advisor to stay with the same mortgage provider as they assume your situation is the same (we didn't have quite 3 years worth of accounts)

This was several years ago though so this may change with the whole can you afford it thing now in place. But as for informing your current mortgage provider there is no need unless you run into difficulties.

Good luck with the business.

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