Working From Home – what can you claim for?

If you use part of your home as an office, you may be able to lower your overall cost of doing business. Here we outline some of the things you might need to know if you intend to claim expenses.

 

Claims

Firstly, you need to think about HMRC. Don’t worry, it’s unlikely to make any enquiries so long as the claim is reasonable and consistent with the type of business being operated. Be wary that not all local HMRC officers follow this approach, so it’s important that you’re prepared to back up your claim if they ask.

A dedicated room or workspace which is exclusively for business use is a must. If it has a dual purpose i.e. dining or kitchen table, then it’s not allowable as a tax deduction.

 

Two common ways of working out how much you can claim:

1. The flat rate method

This is the easiest to work out and doesn’t require any records to be kept or evidence of expenditure. HMRC publishes flat rates each year. The current ‘Home As Office’ allowance from April 2018/19 is £18 a month, making an annual claim worth £208. Not much, but better than nothing, and takes up no time or effort to calculate.

2. The apportionment method

Apportionment is when an expense is ‘split’ between business use and private use, on a basis intended to show the portion of time used for each activity. Apportionment is generally calculated according to the floor area of your home used for business purposes.

The apportionment method splits property costs into fixed and running costs; the amount that you can claim will be based on the portion of use that you have calculated as being applied to your business, and/or the actual cost of the business part of the expense.

For example, let’s say one room in a house with four rooms (bathrooms not included) is used as an office with the following monthly expenses:

Electricity – £60 

Gas – £20  

Council Tax – £100 

Insurance – £40 

Total = £220 

One quarter of the total could be claimed each month, i.e. £55.

(Note that phone calls need to be on a business line, or claimed on a personal line using an itemised bill.)

If you use apportionment, you’ll need to keep all your invoices and receipts as evidence of the costs incurred. By adopting a sensible and realistic approach reflecting your business circumstances, you should be able to successfully handle any HMRC enquiry.

 

Remember:

  • Decide whether the weekly flat rate of £4 or the more detailed apportionment method is best for you. If it’s the apportionment method, review this annually and maintain a record of costs.

 

  • If you only use a table top while your family watches TV, you are unable to claim use of home. However, If you set aside part of your home at specific times for business use, then you are able to claim.

 

These tips are for information purposes and are just a place to start. If you want to know more, we recommend you seek advice from a good specialist Contractor Accountant such as Intouch, who will review your specific situation and provide you with the right advice to make sure you’re claiming all the benefits you’re entitled to.

 

If you’d like more information on Working From Home – download your free guide here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Working From Home – where do you start?

Why work from home?

Contracting and freelancing are fast becoming the choice career moves for more employees each year in the UK and it’s evident why. Being your own boss allows more flexibility and the chance for a better work/life balance. Choosing the jobs you want, and when and where you do them is also a great perk. Some might say that they choose to work from home because a relaxed atmosphere increases productivity and efficiency, while others just like to avoid office politics. There are a whole host of benefits to home working, particularly from a health and well-being point of view.

 

Making it work for you

Most contractors prefer a combination of remote and on-site working, to ensure some kind of visible presence, or because they enjoy the variety it brings. But for those wanting to ditch the office environment entirely, these are some things to consider:

 

Advantages

•Arranging your routine to suit you

•Freedom to spend time with friends and family

•Setting up your work space however you like

•No commuting saves time and money

•Less stressful environment

 

Disadvantages

•Distractions such as housework and people who share the same building

•Finding it harder to switch off

•Feeling isolated. If this is a concern, take a look at our infographic for tips on how to make those all-important connections.

 

Setting up a workspace

The beauty of home working is that you can set up your space to suit your needs. You can use a spare room, convenient corner or even under the stairs – technology means workspaces can be much smaller these days, so don’t build that garden office just yet!

Make sure the space is as comfortable and efficient as possible. Get suitable furniture such as a desk at the correct height and a chair, which is good for your posture. Try not to buy expensive equipment to start with – basics would be a computer, printer and scanner – you’ll soon find out what’s essential. It’s also useful to have a smartphone specifically for business, which you can set to voicemail after hours.

And think carefully about colour and decor, which affect your mood more than you might think.

 

Be professional about it

Communication is one of the most important aspects for making homeworking a success, so reliable broadband is a must, as is making yourself contactable and available to speak during working hours. Respond to clients promptly so they know you’re on the job – they’ll want to make sure they’re getting their money’s worth after all. And don’t be tempted to slob around in your dressing gown all day either! Clients will expect exactly the same standards as someone who is office based, and ‘getting ready’ for work will put you in the right frame of mind too.

 

Costs and claims

Due to virtually no set-up costs, working from home is one of the cheapest ways to start a business. If you’re intending to claim expenses through your Limited Company, your home office should be adequately arranged to indicate that it’s a genuine business and not part of your normal domestic arrangements i.e. working from a dining table the family eat at every evening.

It’s also not sufficient to spend a few minutes a week on admin, you actually need to be working at your home office and generating income to justify a claim.

We’ll discuss more about this particular topic in our next blog, but in the meantime a good Specialist Contractor Accountant like Intouch will be able to advise on Home Office Deductions.

 

If you’d like more information on Working From Home – download your free guide here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

The flexible working ‘movement’: where are we with it?

Today’s complex working landscape presents businesses with the challenge of meeting the demands of people with very different values, expectations and needs. Yet, they all seem to share a desire for flexible working.

It’s little wonder, then, that the flexible working movement has gained such momentum in the last decade. Employers have recognised that the traditional workplace is no longer fit for purpose. But we’re yet to reach a point where flexible working is ‘the norm’, even four years on from the introduction of laws by the UK government which gave everyone the legal right to request flexible working.

 

To use the ‘right to request’ or not

People are still unsure whether or not to use their right to request flexible working, for fear it could be perceived as a sign that they are less than dedicated to their job. In a study conducted by social media training experts Digital Mums last year, more than half (51%) of UK employees believed that asking for flexible working hours would be viewed negatively by their employer and a further 42% thought it would have a negative impact on their career.

Millennials, who are one of the key drivers of the movement, were particularly wary of not wanting to upset their employer, with two-fifths (40%) saying they’d be too nervous or worried to ask for flexible working hours, despite eight in ten (77%) wanting this way of working.

Those fears might very well be legitimate. According to a new joint report from flexible working experts Timewise and consultants Deloitte, more than 30% of workers who opt for flexible hours feel they have less status and importance as a result. A quarter of the 2,000 people surveyed also thought they had missed professional opportunities because of this.

For freelancers and contractors, there aren’t the same lingering fears, although they might have some concerns about whether working remotely could impact on the relationship with the client, if there is an expectation to be on site every day.

 

Remove the need to request

As we revealed in our previous blog on the pros and cons of flexible working, however, any concerns employers might have about what flexible working could do for business are often shown to be ill-founded.

Ask anybody who works flexibly whether they work harder and more productively now than they did when they were in a more structured setting and the answer would be unequivocally ‘yes’. Flexible workers often say they feel like they owe it to their company to go beyond the call of duty every day. While that brings up another issue entirely around work/life balance – another main driver of the movement – it goes to show how much staff value flexible working.

In a recent piece of research by SmallBusinessPrices.co.uk, more than a quarter (28%) of respondents said they value additional holiday days, sabbaticals and flexible working hours as employee benefits, over receiving a pay rise.

By promoting flexible working – rather than making employees request it – employers could find themselves with a line of new talent at the door, while holding onto the existing talent they already have in the building.

It could even help end gender discrimination in the workplace. According to the Timewise/Deloitte report, one of the biggest barriers to gender equality and pay parity is employers’ continued refusal to accept non-traditional working practices.

Timewise chief executive Karen Mattison stresses that the family structure in which one person stayed at home and another went out to work is “no longer the case for the majority of UK households” and employers need to react by changing their flexible working practices.

With the technology available today to facilitate flexible working, it’s never been a better time for individuals to dictate how long, where and when they work. More and more people are taking the plunge and ‘going it alone’ as either a contractor or a freelancer.

Of course, with Intouch Accounting by your side, you’re never alone. We are here to support you by answering any questions you may have, from assessing whether it’s the right time for you to contract or freelance, to helping you set up a Limited Company.

 

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Flexible working: Pros and cons

There’s no doubt that we’re now living in the era of flexible working. Of course, for contractors and freelancers, this trend of choosing how long, where and when you work is nothing new, but now it’s not just the self-employed who are empowered to manage their schedules.

In the UK, nearly-two thirds (64%) of employees now work flexibly, according to the ‘2017 Flexible Working Survey’ by Ten2Two. However, it seems that employers are still a little reticent to fully embrace the flexible working revolution, with Timewise’s 2017 report revealing that less than one in ten jobs paying over £20,000 are advertised as being open to flexible working.

So, why is it that firms are somewhat unsure about whether or not to promote flexible working to staff? Like anything, flexible working has its pros and cons. We’ll start with the cons:

 

1. Could hinder productivity

Organisations are concerned that giving everybody a degree of freedom in deciding how work is completed will result in reduced productivity for both individuals and teams. Even if employees are just 5% less productive working remotely, it’s going to start adding up once you think about it collectively. Meanwhile, for those who are self-employed, a day of distractions at home could mean that you have to play catch up at the weekend.

 

2. Feelings of isolation

Flexible working sounds good in practice for individuals, but the reality can be very different. For some people, too many consecutive days working solo can lead to feelings of isolation, particularly if communication with the ‘outside world’ is lacking. A good support network is essential so that individuals don’t feel like they have nowhere to turn should they need to. Meanwhile, from an employer’s perspective, a lack of collaboration between colleagues could limit the cohesiveness of teams and the sharing of ideas.

 

3. Work intensification

Flexible working often blurs the line between work and home, to the point where individuals struggle to switch off at the end of the day – an issue all contractors and freelancers who work remotely wrangle with. For the sake of work/life balance and productivity, individuals need to feel like they can pack work away for the day and not like they owe it to their company to go beyond the call of duty every day.

 

However, few would doubt that the pros of flexible working far outweigh the cons. In Ten2Two’s survey, 83% of employers agreed that flexible working had benefited their business. Here are the main arguments for adopting the trend:

 

1. Work anywhere remotely

Perhaps the benefit you most associate with flexible working is the ability to work remotely, away from the traditional office environment; be it at home, in a cafe, library, shared space, or even in a foreign country. Find the environment that brings out the best in you – if that’s at home, make sure you ‘craft’ in a way that means you can get stuff done.

 

2. Less stress + fewer sick days = increased productivity

Workplace politics can be a real problem if they are rooted in manipulation or gossip. Flexible working can help to minimise office politics, so the potential for conflict and any resulting occupational stress decreases. As stress decreases, so will the number of sick days employees take in the working year. This has obvious benefits to employers in terms of greater productivity, but it’s also valuable for freelancers and contractors who might have to forfeit a day or two’s work if they’re too sick to get out of bed.

 

3. Greater convenience for life priorities

Everybody has different priorities in life. For some people, their children will be the priority; for others, it might be sports and keeping fit. Flexible working gives us a better chance of being successful at what matters most to us. For example, having a flexible schedule means you can take an hour out to pick up the kids from school and do the food shopping.

Ultimately, flexible working works for some people, but others may need a bit more structure.

If you’re considering a flexible approach to work and think contracting is for you, Intouch Accounting are here for support by answering any questions you may have, from assessing whether it’s the right time, to helping set up a Limited Company.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

If you contract from home, you’ll want to read this…

6 ways to beat loneliness when working alone

Contracting from home can be great; you get to design your perfect working space, what radio station you listen to and enjoy endless cups of tea whilst wearing your slippers (should you wish to). But whilst it can sound like the perfect working environment for many, loneliness can creep in – especially if you have minimal client contact and few other contracting colleagues to talk to.

 

Even introverts can feel lonely, so if you enjoy working alone and think this blog isn’t for you – read on anyway. You might just discover a new tip that will improve your productivity when contracting from home.

 

1.What fuels your professional fire?

It could be an early morning 5K before breakfast, a lunchtime catch up with an old friend, or even jumping on the contracting forums to share your thoughts on what’s currently affecting the contracting community.

 

Whatever it may be, ensure you have a few options that you can call on when you feel your fire burning low. Your professional productivity will thank you!

 

2. Speak to your suppliers

Your Personal Accountant isn’t just there to answer your accountancy and tax questions, they can also give you advice on all the areas that surround self employment. The same can be said for your business insurance provider or financial adviser for example, should you enlist their services.

 

They speak to individuals just like you every day about a whole host of topics, so why not give them a call? Or better yet, schedule a monthly call with them to discuss your career and how they can help you achieve your goals for the month. They may have just launched a new product or service that could make your contracting life easier.

 

3. Ban your home office as your meeting location

It’s all too easy to update your client from the comfort of your home office, or liaise with prospective clients from behind your computer screen. But doing it too often can lead to feelings of isolation, which isn’t good for you or your client.

 

Remember the good old days when people actually enjoyed meeting face-to-face? Why not bring it back! The next time you have a planned meeting, go to your client or prospective client’s office and actually meet with them. Not only will they get to see who you are as an individual and get a taste for your personality, you’ll also have more of a sense of purpose by actually getting ready and leaving your home office.

 

And remember, as a Limited Company contractor you can claim your travel and subsistence expenses, so there really is no excuse not to!

 

4. The legend of the invisible contractor

As a group of professionals, the UK’s micro business community (those with 1-9 employees) currently stands at an impressive 5.25 million*, so as a Limited Company contractor you are certainly not alone.

 

Whilst you may feel as though your contribution to the UK’s economy as a one-person band is minimal, collectively you’re a force to be reckoned with! So why not reach out to your contracting colleagues to find out their thoughts on being a contractor, what trends they’re seeing for desirable skills or even if they have any contacts that could be of use to you? With such a large community, there’s no reason to feel alone.

 

5. Be strict with your time

As a contractor your time is just that, yours – so ensure your work does not encroach on your personal life. After a hard day of working it’s too easy to swap plans with friends or family for a quiet night in. Once in a while it is a great way to recharge your batteries, but do it too often and you’ll cut yourself off.

 

Set yourself a daily schedule, stick to it and don’t let work be the reason why your personal life is put on hold.

 

6. Get moving

A little exercise now and then is the perfect way to blast away any loneliness. Was there a sport you loved to do as a child that you’d like to try as an adult, or local sports team whose social events sound as much fun as the actual sport itself?

 

Healthy body = healthy mind, so get out there and start having some fun!

 

Final thoughts

It can be tempting and easy to fall into the trap of becoming a lone wolf, so ensure you have a personal plan that works for you to help banish those entrepreneur blues.

 

And remember, your career is something you love so tailor it to suit you. Don’t let loneliness stop you from reaching contracting greatness!

 

*The Department for Business, Energy & Industrial Strategy

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

 

Final top tips for setting up a great home office workspace – part two

Our final 5 tips for setting up a great home office workspace

In last week’s blog we shared five top tips to help you start setting up a super home workspace. Now you’ve got the basics covered, here are another five tips to help you set up a workspace which is not only pleasant to work in but also highly efficient:

 

1. Get equipped The equipment you’ll need depends on your type of work and you probably have the basics – computer, printer, scanner, shredder. It is useful to have a smart phone specifically for business which you can set to voicemail after hours.

 

Insider knowledge: Don’t buy expensive equipment to start with. You’ll soon find out what’s essential.

 

2. Where to put it? When planning, make a list of all the materials you’ll need to store – books, ink, paper, stationery…  It’s easy to underestimate your storage needs and end up with a cluttered and inefficient workspace.

 

Insider knowledge: It’s cheap to source smart boxes and files in co-ordinating colours.

home office

 

3. Getting together Unless you have a dedicated room for your home office, consider whether you might prefer to meet clients elsewhere, either at their base or in a meeting room rented by the hour in a hotel or large office building.

 

4. Decorating and finishing touches How your workspace looks affects your mood and motivation so consider colour, texture, comfort and ambience. Have a look online for ideas.

 

Insider knowledge: A notice board for uplifting photos, affirmations, letters of thanks helps with motivation and some people like to burn scented candles or play soothing music to inspire or encourage creativity.

 

Remember, if you will be video calling or conferencing your background should look uncluttered to avoid distracting the caller.

 

5. A place for everything… Before you decide where you are going to put everything in your workspace, sit in the chair and imagine going through a normal work day.

  • Is everything you need to hand?
  • Is your phone in its charging cradle in front of you?
  • Do you have to open a drawer to find a pen or notepad?
  • Do you have to get up to reach the filing cabinet?
  • Stretch to reach a much-used reference book?
  • Can you see the wall clock without twisting round?
  • Can you reach the switches for computer and peripherals?

 

Then move everything to its optimal position. The trick is to keep the most-used items nearest and the least used items farther away.

 

A tidy office is a tidy mind so having set up your workspace, keep it well organised so you can impress with your efficiency and ability to find information quickly.

 

And try to avoid this! :

 

great home office

 

Finally, sit back and enjoy your workspace and the exciting prospect of working from home.

 

In next week’s blog we’ll reveal how contracting can give you the professional and  personal lifestyle you’ve always wanted.


Meanwhile, if you have any tips or your own ideas on how to create a workspace to harness maximum productivity, we’d love to hear from you so please leave a comment.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

5 tips for setting up a great home office workspace

5 tips for setting up a great home office workspace

Can you ensure maximum productivity when working from home? Or are you distracted by clutter, noise, household chores…or 100 other things?!

In the first of our two-part blog, we share our top tips to creating the ideal home workspace to ensure home and work life can run in harmony! If you’re working from home or are about to start, you need to consider the practicalities of setting up a workspace which is comfortable and efficient.

It’s possible to spend over £20,000 for a top of the range home office, but it makes more sense to start with something a little more economical. You don’t want to spend your profits before you’ve made them!

Follow these five tips to get started on creating the perfect home office workspace. We will reveal the following 5 in our next blog:

 

Planning is key in creating a great workspace:

1. Can home and work mix? Ideally, you will have a spare room, but many people use a corner in another room of the house.  Others fit an office under the stairs. It’s possible to convert your loft or build a garden office if money’s no object. Technology means workspaces can be much smaller than previously.

 

2. Silence is golden. Will other people be at home during your working hours?  If so, you need to be as far away from noise disturbance as possible. Young children don’t understand a “Do Not Disturb” notice. You should also consider privacy and client confidentiality if you share your home.

 

3. Simplicity is best. Aiming for a paperless office will mean more space for you and is better for the environment.

 

4. Ergonomics. Make efficiency and comfort your priority – consider lighting and whether backrests, footrests or wrist pads would be beneficial. Place your equipment where it will save bending. Spend as much as you can afford on a really comfortable chair – this should prevent any tendency to lie on the sofa with your laptop…

 

5. Furniture. You may already have suitable furniture or you could consider buying secondhand and repurposing it. You could try refurbished office furniture companies or retailers such as Ikea. For about £300 you can buy a workstation which very neatly looks like a cupboard when closed.

 

It’s almost time to sit back and enjoy your workspace and the exciting prospect of working from home.

 

In the second of our two-part blog we share five more tips to setting up the ideal home office, that includes how aesthetics can increase your productivity and what happens when you need to have a client meeting.

 

What works for you? We’d love to hear your tips so please leave us a comment.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

What can I claim for when using my home as an office?

What can I claim for when using my home as an office?

For many Limited Company contractors it doesn’t make financial sense to rent out office space. Instead, a room or area in their own home is set aside for business use. This provides the convenience and flexibility of working at home on the tasks needed to run the business as and when the demands of fee earning work allow.

If this is how you operate your own business you’re likely to be able to claim a use of home as office allowance from HMRC. This allowance recognises that many smaller businesses legitimately conduct part of their business from home and incur related expenses.  The rules around claiming are quite stringent, but nonetheless it’s worth claiming what you’re entitled to rather than missing out.

HMRC rules for use of home allowance

The general rule is that tax deductions for home office use only apply to expenses that are wholly and exclusively for the business. In many cases working from home involves use of space and resources that are in private use much of the time, only partly being used for business purposes. Generally, as long as the expenses claimed are reasonable and match the kinds of expenses a business like yours would usually incur, HMRC are likely to accept them. Just make sure that you’re able to justify each expense if HMRC asks you to do so.

There are two methods used to calculate use of home allowance claims: the Flat Rate or the apportionment basis.

Flat rate method for use of home claim

This is the easiest to work out and does not require any records to be kept or evidence of expenditure. HMRC publishes rates each year, the current use of home allowance for April 2014/2015 is £4 per week making a total of £208 per year. Not much, but better than nothing!

Apportionment basis method for use of home claim

This is more complex to work out but if you do a lot of work at home the effort can be worthwhile.   You’ll need to keep the invoices and receipts of all relevant expenses, as well as a record of the basis and detailed calculations of the business portion you’re claiming for. This is generally apportioned with reference to the number of rooms in the house, and the amount of time that you use your office space for business purposes and private purposes.

The apportionment basis splits property costs into fixed and running costs. You can potentially claim for both, as well as for items of capital expenditure such as office equipment. The amount of the claim will be for the portion of use that is applied to your business.

Fixed costs – these are items that apply to the property itself, such as Council Tax, mortgage interest, water rates, insurance, repairs or rent. It’s important to only include HMRC allowable fixed costs, which must be related to actual business use. When claiming for insurance costs, if there is a separate policy for the business then this would be allowable in full. Otherwise you can claim a proportion of the general household insurance using your business use apportionment calculated above.

Any expense that relates to the house as a whole can be apportioned and included in the home as office claim, for example exterior painting of the whole property or even garden maintenance if customers visit the property regularly. However if the repair relates solely to a part of the house that is not used for business purposes then it would not be allowable, such as decorating the lounge when this is never used for business purposes.

Running costs – these are items which vary with use, such as light, heat, power,  telephone and broadband. Only allowable costs should be included and elements such as floor space and duration of business use should be factored into the calculation.

Some running costs also have a fixed element, such as fixed line rental on a telephone. Again, the business use portion would need to be calculated to work out the amount which can be claimed.

It is worth bearing in mind that as long as a part of your house is not used exclusively for business purposes, then there will be no question of a capital gain when you sell your house at a future date. If a part of your home is used exclusively for business purposes there may a case for HMRC to disallow the Principle Private Residence Relief on that proportion of the sale proceeds on a future sale.

Your contractor accountants will be able to provide expert advice on these calculations to help you claim the maximum allowance available to you, whilst not becoming liable to capital gains tax on any future sale of your home.

For more detailed information on this topic, including worked examples of how the use of home allowance might apply, download the Intouch Contractors Guide Use of Home as Office.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Rent a room scheme

Rent a room scheme

Many Limited Company contractors will carry out at least some of their work from their own home. Even if the majority of client work is done at the client’s site there will still be admin tasks like book-keeping and invoicing which will usually be done at home. Most contractors will be aware that HM Revenue & Customs recognises that some home working is necessary for contractors to run their businesses and allows applicable costs to be charged to the company. What some may not be aware of is that it is also possible to claim an additional tax allowance if you rent out a furnished room or even a whole floor in your property. You don’t have to own the property to claim this either; you simply have to be living in it as your principal residence. If you qualify for this extra allowance, this could give you a potential extra tax saving of up to around £850 per year.

These two allowances work in entirely different ways, so speak to your contractor accountant to find out if and how they apply to your own circumstances.

Use of Home allowance

Basic claim – If you do not have a specific room in your home set out for business use and only use it to carry out general administration tasks you can claim £4 per week. You do not need to keep any records of costs and this kind of claim is unlikely to be challenged by HMRC.

Apportionment of costs – If you usually do your fee earning work from home and have a separate room set aside for this purpose you can make a claim based on the amount of space used and the actual costs incurred. In this case you will need to show how you calculated the amounts claimed and keep all relevant bills and invoices for 7 years.

As the apportionment of costs option is clearly a little more complex to calculate, speak to your contractor accountant for guidance to ensure you’re claiming the correct amount.

Rent a Room scheme allowance

The rent a room scheme allows you to personally earn up £4,250 per year tax free from renting out furnished accommodation in your home. This is halved if you share your income with partner or someone else.

The details of this scheme are:

  • The tax exemption is automatic if you earn less than the minimum income tax threshold.
  • If you earn more than the threshold you must complete a tax return. You can then choose to opt into the scheme and claim your tax free allowance on the return.
  • If you choose not to opt into the scheme you must record your income and expenses on the property pages of your tax return.
  • You can opt into or out of the scheme at any time.
  • To be eligible you must be a resident landlord – whether or not you own your own home – or run a bed and breakfast or guest house.
  • This scheme does not apply to homes converted into separate flats.

Opting into this scheme may not be the best option for all contractors, so check with your contractor accountant that this is a sensible course of action for your own personal and business tax circumstances.

At Intouch all of our clients are kept up to date with the most tax efficient options available. This helps ensure that they maximise their income while remaining fully HMRC compliant.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.