What can I claim back tax on when some things are used as part of the business and some for the home, such as car, internet, phone and so on.
As you’ve only just set up, we’ll assume that you’re operating as a 'sole trader', and not working through a limited company.
In some fields though (eg IT contractors) the company route is more normal, and the rules are different as the company claims expenses in respect of things it owns, and you, as an employee of the company, have to claim under the normal employee expenses rules (which are not as generous) for items you own, eg car, house etc.
If you run your own business from home, there are many things you can claim tax relief for. Tax relief is available for the extra household expenses that have to be paid if working from home – such as:
• Gas and electricity costs for the area you use for working within your home
• Business telephone calls and internet usage – ideally itemised, or as a proportion
• Car usage – a percentage of tax relief is available based upon how much business use is incurred. In addition a percentage of the 18% capital allowances may also be available on the vehicle, based upon the percentage of business use.
• Computers, bookshelves etc – either a capital allowance deduction going forwards or, while it’s still around, the Annual Investment Allowance
• Mortgage interest, council tax and household insurance – as a proportion by floor space, number of rooms or usage, although remember that if you use part of your house exclusively for business it could become liable for business rates, and capital gains tax when you sell it
• VAT is often overlooked but once your turnover exceeds or is expected to exceed £70,000 you must register with HMRC.
• You can also make what is called a voluntary registration below this turnover level - be warned you will need to charge VAT on your invoices
It is important to claim all tax reliefs if you are running a business from your home, or if you are working as an employee at home; however small the relief payments may be, it is still important to claim them. That old adage of looking after the pennies and the pounds will look after themselves is certainly relevant in this case.
Above all, make sure you keep clear, complete and up to date records – good habits learnt now will pay you back in time and money saved later when your business grows.
See also: Get your business back on track