help please - question about capital tax allowances

[Lola11]

I am thinking of starting some child-minding from home with a friend of mine.(neither of us has any experience with own business) I would like to make some improvements/build an extension in my house but not sure how much if any of the investment I would be able to claim back as a tax allowance? I would like to know before I start the business and also the building works so I can make better financial plans for both. Can someone with experience please help. Thank you

It depends on the exact work, some you would be able to claim as tax deductible in the year such as safety addtions etc but some would be capital (mainly the building works) and get no allowances. You also need to consider your capital gains tax position.

I would suggest you speak to a tax advisor or accountant, as you need to be careful not to incur tax liabilities on the sale of your house in the future.

Is this going to be extra living space which you will use for childminding? Or is it a purpose-built 'nursery' with low toilets/sinks and other child-friendly adaptations?

If it is the former, don't worry about future tax liabilities. If it is the latter, you might have to think about it a bit: you might also be able to get some capital allowances for embedded plant.

All these costs are going to be capital in nature. There is no longer any capital allowance for buildings, but there is for what is called 'plant and machinery' which is a very wide definition basically covering anything (that is likely to be incurred in this case) which isn't part of the building fabric. This will include safety gates, childproof locks etc. as well as computers used for the childminding business, play equipment etc.

The first £50,000 of capital expenditure can currently be offset against your trading profit.

Please note that the above is provided for information only and is not professional advice.

Thank you very much both! I understand that all the equipment used for business, toys etc will be offset against the profit. Still a bit confused about the total cost of building extra space. It will not be a nursery with purpose build toilets or anything, (just all safety equipment) I need to have more space if I am going to look after number of children. It will be used for living too once it is there as we could do with a guest room and more space in general but I wouldn't necessarily be building it if I was not planning to use the space for child minding if that makes sense. Does this mean that I will not be able to offset any of the cost for creating more space (labour and building materials) against profit before tax? I will have to remortgage in order to carry out the work which means that monthly expenditure for the mortgage will go up. Sorry, I just want to be totally clear before I continue with planning.. Thanks!

No you don't get any capital allowances for this building work. But you can get an allowance for a proportion of your mortgage interest.

The rules on claiming expenses for the use of your home for childminding (or any other self-employed business) are complex and ever-changing and many people and organisations do not have a correct, up to date understanding of them (including some who should). But HMRC's internal guidance is available starting here; read this for a full understanding of what will be allowed and disallowed.

Thank you very much!