Personal Tax

Use of home as office

Produced by Tolley
  • 27 Oct 2021 14:52

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Use of home as office
  • Self-employed
  • Deductions for expenses under the general rule
  • Travel expenses
  • Household expenses
  • Capital expenditure
  • Value added tax (VAT)
  • Deductions for expenses under the fixed rate rules
  • Vehicle costs
  • Use of home for business purposes
  • More...

Use of home as office

Many people work from home either on an informal or a full-time basis. These people can be employed or self-employed, and their employment status affects the expenses they can claim as a deduction from their earnings.

When dealing with someone working from home, it is important to note that although exclusive business use of part of the house may mean that it is possible to claim tax relief for more of the household expenses, it will restrict capital gains tax relief on the sale of the house. This is discussed further in the Principal private residence relief ― anti avoidance guidance note.

Normally, there will be no liability to business rates if the room(s) used for the business is also used domestically. If a significant proportion of the property is used exclusively, or almost exclusively, for business, then business rates may be payable. The council tax banding on the remainder of the property may also need adjustment. For more on business rates, see the GOV.UK website.

Self-employed

The general rule for allowing revenue expenses against self-employed earnings is that the expenses must be:

  1. not capital in nature, and

  2. wholly and exclusively for the purposes of the trade (the non-business proportion of the expense is disallowed)

ITTOIA 2005, ss 33, 34

The general rule is applied to the different types of expenses home workers might incur. With most home expenses, this means that the allowable deduction will be the amount of the expense which relates to the homeworking (eg 10% of the electricity bill, for example).

For more discussion on the general rule, see the Wholly and exclusively and Capital vs revenue expenditure guidance notes.

Alternatively, fixed rate deductions may be claimed by the self-employed. This reduces the administrative burden, although the fixed rate deductions may be lower than the deductions available under the general rule.

Expenses under the general rule and the fixed rate deductions rule are considered below.

Deductions for expenses under the general rule

Travel expenses

When considering whether travelling

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