Claiming the cost of Working from HomeOne word of warning – You should take care that your claim is not disproportionate to the actual usage. The Inland Revenue could take the view that the area used for business purposes should be disallowed from the exemption to Capital Gains Tax for the main domestic residence (your house!). This could result in a claim for Capital Gains Tax on any sale of the house for that part used as a base for your business.
Equipment - Any equipment purchased for the business can be counted as capital expenditure and can qualify for tax allowances in the business, known as 'capital allowances'. This means that a proportion of these costs can be deducted or ‘written down’ from your taxable profits and will help to reduce your tax bill. This ‘written down’ expression simply means the loss in value of a capital item and this is a ‘cost’ to the business and can be claimed against your taxable profits accordingly.
Vehicles - If a car is used in the business, a proportion of the cost of running it - such as petrol, repairs or servicing - might be allowable as well, as a 25 per cent write down. Alternatively, you can charge 40p per mile (up to 10,000 miles). To claim car expenses against your business profits you need to keep a record of mileage.
Other items - Other items might be eligible as deductions in your self-assessment return if they are wholly and exclusively used in the business.
Choosing an Accountant
One of the perennial problems for the Self-Employed business owner is whether to have an Accountant and when to choose one. There is no doubt that isolation is an issue for the Self-Employed and the necessity to build your own 'support network' should be one of the most important tasks to undertake early into the life of any small business.
We all understand that the Accountant you choose should be suitably qualified etc but far more important to most business owners is whether their Accountant is someone who they can get on with and whether the Accountant understands how the owner's business works. The ability to relate to your Accountant is a priority as it is very likely that your Accountant will become one of the most important, if not the only, adviser to the business as well.