Claimable expenses and capital allowances

[Thandeka]

Hello just starting to get my head around my tax return and just wanted to check a few things with the knowledgable mumsnetters as the DWP and business link websites are chocolate teapotting me!

If I work from home a lot of the time I can claim a portion of my heat, light, council tax and rent for the cost of the room- am I right its something like you divide the total by the number of rooms in your house (excluding kitchen and bathroom? why do I think to exclude this? or is it just bathroom you exclude?)- so 2 bed flat with living room, kitchen and bathroom- is 5 rooms so do I divide my total by 3 or have I got that completely wrong?

Also capital allowances are soooo confusing- In the tax year I am claiming for I brought a laptop and desk for the "business". This tax year I have brought a filing cabinet and office chair. Now am I right in thinking I can only claim a fraction of what these cost each tax year until the expense is paid off? I can't seem to find out what fraction that is. I have a feeling its 25% but i am probably completely wrong!

Nargh! If anyone can help then eternal mumsnet gratitude to you. Want to get this tax return sussed myself and my business properly up and running (is in a weird in between limbo stage at mo) before I hire an accountant!

WRT the laptop etc. you need to record them as Fixed Assets. Now you can claim 100% of equipment bought after 6th April 2008 up to a maximum of £50,000. So basically, you can claim the whole amount as 'Annual Investment Allowance'

www.hmrc.gov.uk/worksheets/sa103f-notes.pdf Details are on this sheet (think it was section 8 iirc)

No idea about the rest though

That link is soooo helpful! Thankyou so much. Yup that is perfect thanks- PDF now saved safely away- it even alludes to my other questions but declines to give me the definitive but I shall keep reading......

Yes, you can claim a proportion of your household expenses; the HMRC guidance on what proportion is here. In the example you give you could claim 1/3 of most household expenses if you use that room only for your business. In a 2 bed flat with (presumably) a child, I think it would be a bit tricky to demonstrate that.

Beware that if you claim business expenses for part of your main home, HMRC will come looking for capital gains tax when you sell.

What crafty says about the Annual Investment Allowance is correct, but for anything bought before 6 April 2008 (or 1 April 2008 for a company) it is more complicated.

But look, if you are planning to use an accountant don't think you will save money by trying to do his job for him. You don't start unbolting bits of the engine before you take your car in for a service do you?

If you get it wrong you pay too much tax and have to pay your accountant to fix it. If he gets it wrong, that's what his PII is for.

Thanks very much MrVibrating- very helpful- no child yet so room is solely an office for the next tax year at least! Oh and we currently rent so no issue of capital gains.

Prob won't get an accountant for my tax return 08/09 so need to sort it myself. Will probably get one for 09/10 as my tax will be more complicated by then (although I could be a pro at returns by then! hah!)

As MrVibrating said, there may be a capital gains tax issue if you say that part of your home is used entirely for business purposes. However, this does not apply if the room also has some personal use (perhaps you mumsnet in there, and pay a few household bill?) when you are not using it for work.

You wou would claim for, say, 1/3 of your household costs if you are using one room in a 3 room flat, but then reduce it again, to account for the proportion of time the room is used for: so, a room used for 8 hours for work, and 1 hour for personal use could charge 8/9 of the early fugure you calculated.

I claim 1/7 of my total house running costs, as I use one room exclusively for work for four hours per day, but then reduce that by a further 50% because the room is used for up to four hours in the evening by my family. My accountant thinks this is reasonable.

oh - just noticed that you rent so CGT not an issue - don't know if there are any other advantages to declaring some personal use of the room (local authority business rates perhaps?)

Ah okay our room is sometimes used by DH for reading and as an occasional spare room and also I won't necessarily be working in it 8 hours a day as somedays I will be out and about. So will have to come up with some kind of reasonable proportion.

(As currently at 1/3 running costs that works out about half my profit (small earnings last year as was only doing little bits) for last tax year! Which the taxman may find a touch )