Hurrah! New Tax Breaks for WAH Businesses!

Great news from the good ship Her Majesty’s Revenues and Customs, who seem to have had a change of heart this week with regard to the type of expenses that can be claimed by the self-employed and business owners who work from home WITHOUT their home becoming liable to Capital Gains Tax when you sell it (…if you decide to sale, obviously… we’ll be discussing the sense, or otherwise, or this in our forthcoming Funky Finance on the soon-to-be-live New and Expanded Funky…)

New guidance in HMRC manuals, published on their website contain examples of the level and nature of home expenses that can be claimed. There are two areas of particular interest:

Specific expenses and mixed use of premises, and they’ve even given some useful examples!

A new element is term ‘fixed costs’ and includes mortgage interest, council tax and home insurance, and for the first time HMRC are content to allow a proportion of these costs to be claimed against the income of your business if certain criteria are met, such as:

• The area of your home is used exclusively for business purposes for a prescribed amount of time – say, 9am to 3pm, which basically means that if you sit at the kitchen table working you won’t qualify for the additional deductions. Personally I think that is all to the good anyway, as you’ll know if you have already read my discussion of your home office, since perching at the kitchen table or on the sofa with your laptop will play havoc with your back! And psychologically it is much better, anyway, to have a separate office space, and it seems that the lovely taxman has recognised that and is looking for is an area that has the appearance of a home office ie it contains a desk, computer, chair, and storage etc etc.
• The amount you claim has to be reasonable in relation to your business – so you can’t claim that you work 20 hours a day in the office (however much it might feel that way sometimes when you’re in the middle of a rush!. Additionally, the area used is the main proportion of the living area of your home – we’re talking 5-15% of the total living space, on average, here.

Apart from these two provisos, you will now be able to claim a percentage of the total cost of running the home. Which is news to celebrate over, perhaps mostly because it is a firm indication that the powers that be are getting behind the WAH trend in the UK and beginning to try and help!

So get the champagne out (you know me, any excuse!) and let’s raise a toast to the new era of working from home within our communities around our families!

NOTE: For further information see HMRC’s manual at BIM47825