Morning! Hoping someone can offer advice please!?
My wife has set a small business up which she runs from home. She has a dedicated office space, which we don’t have to pay business rates on. She’ll be doing a self assessment tax return as she recently registered the business, and we have some basic questions. If there are any good sources of info that people can point us to that’d be awesome. Any direct answers are hugely appreciated!
What’s the threshold at which she starts to pay tax, £1k?
Does she get her personal allowance still or is that only for PAYE?
Can we claim tax relief on the costs of her office? How far does that extend? Mortgage, house insurance, council tax, heating, electricity, water? What’s the percentage of any of these that she could claim?
I assume anything related to the business such as training or materials are tax deductible.
Anything else she should be aware of?
Many thanks!!
This is an excellent site for taxes generally https://www.litrg.org.uk/tax-guides then there's gov.uk such as https://www.gov.uk/expenses-if-youre-self-employed and https://www.gov.uk/simpler-income-ta...ified-expenses.
Google any key words and you'll find a plethora of answers. It's good to do that as you'll understand things better and pick up some extra useful knowledge as you go.
Ace, thanks Dave!Originally Posted by deepreddave
An accountant will sort ALL that out for her for a very modest fee per annum.
As above, and if your wife is creating a Ltd Co - (you don't actually say if Ltd Co or Sole Trader) she will need an accountant at year end anyway, and an appointment with a suitable accountant will establish what expenses and allowances she can submit.
But in general
Council tax, house insurance, mortgage do not qualify for any allowance
She can claim 20% of domestic energy costs, and phone bills from the Ltd Co to herself.
There is an allowance for use of a room - as an office (I think it is something like £250/yr)
She will get an allowance on existing equipment brought into the business (like her laptop, printer, PC etc)
She needs to see an accountant, but if she is reliant upon augmenting the mortgage, council tax and insurance as part of her business plan - it might save her from proceeding that far.
Your wife might want to think about Professional Indemnity Insurance to cover her if there's an issue with her work. Depending on the type of work she's doing, it might be a requirement of the job.
This should be tax deductible and can be bought online (eg Hiscox or Simply Business).
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Council tax and mortgage interest are deductible.
Speak to a local accountant with a good reputation. Seriously it saves a whole lot of hassle and confusion.
That took me by surprise, but think I looked at that previously - and discounted it.
https://www.westlancsaccountants.co....pany-director/
Ah apologies I see you were specifying Ltd company directors…
You can do it , and it is legal - but appears to carry a potential sting in the tail.
What would that be ?
As I understand it - paying CGT on what was rented out for those years. i.e. not wholely your principle residence for selling free of tax
Now - who knows if it would be found out (if valid) - but is something to consider.
Thank you for all the info! She is a sole trader. One question that isn’t entirely clear, does she get her personal allowance still? If so, that makes things very simple!
Yes she does.
If you did sell your home and you're using the same accountant as for the company then they should require disclosure of any gain as they'd be aware of the rental agreement. In many scenarios it's not a major issue but I've seen the odd case where it was so worth checking the consequences every now and then (and don't exaggerate the commercial value of any rent charged).
Amazing, thanks!
Don’t forget “Making Tax Digital” is required for VAT registered businesses and will be in 2024 for the self employed. It’s best getting it set up now whilst starting off to avoid hassle later.
But, don’t get sucked into Sage and some accountant-channeled software - there are plenty of low cost options out there
HMRC don’t do round sum amounts like that. 20% sounds OTT for using one room for, say, 35h pw.
Interesting - I have been claiming that since 2006, and presumably based on something in the rules back in 2006 and never corrected by 3 accountants.
Your rental contract needs to stipulate the rent is for office hours otherwise you won’t get CGT relief for that proportion of the house on sale.
There’s some dodgy advise on this thread so everyone please seek a good tax advisor!
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As an employee\director you can only claim for the increase in your bills so nothing for fixed costs like council tax, mortgage interest (self employed can). Round sums aren’t allowed unless you claim £6 per week which needs no supporting docs.
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Suspect that sort of thing happens a lot but there’s absolutely no legal basis (and wasn’t in 2006!) and (theoretically) it would be open to challenge - unless, exceptionally, 20% is the “right” number!
When my business was profitable. I wrote off anything I could. Auto, computer programs all inventory etc.
I'm in Canada, so things may be different
As I wasn't a LTD. or INC. business. All earnings were classified as personnel income
Depending on earnings. You can only write so much off. The higher. The more
I would find an accountant and pay a consulting fee or just have one do the end of year work for you
DON
Just to clarify, there is no legal requirement for a sole trader or company* to use an accountant, though I agree it is definitely a good idea and could well save her more in tax than the cost of their advice.
*unless a company breaches the audit requirement threshold through having turnover of £6m, assets of £3m and 50 employees. But it might take her a few years to reach that :wink:
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