Anyone running a business from home should check if they need permission to do so: from a mortgage provider or landlord. Your local council may also need to be notified, for example, if you need a licence to run a home-based business. Running a business from home may also create a charge to business rates and might affect property insurance costs.
Other business costs you may need to consider include:
- Home based business insurance to cover Employers and Public Liability and any business equipment, and
- You may need professional indemnity cover.
HMRC will have no problem if you claim a proportion of household expenses, but the calculations involved can be subjective: how much space is taken up by your business, how long do you spend working at home each day, what are your monthly household costs? As a workaround, HMRC have a fixed rate allowance that you could use instead of plowing through endless calculations. If you work more than 25 hours a month from home you could claim:
- 25 to 50 hours a month – claim £10 per month
- 51 to 100 hours a month – claim £18 per month
- More than 100 a month – claim £26 per month
Depending on your monthly household costs, claiming these fixed rate allowances may be short-changing your option to claim a realistic proportion of your actual costs. The only way to see which is more beneficial is to work out the alternatives.
Clients often ask if claiming for business use of home costs will result in a charge to capital gains tax when they sell the property. There is a risk, but it can be avoided if you ensure that the space you designate as a home office doubles as a hobbies room, or space to store your golf clubs. The key is to demonstrate that the area has a duality of use: business and private.