Use of home as an office

If you work from home then you are permitted to claim for the costs incurred in providing office/storage accommodation. You may claim a flat rate of £4 a week or a proportion of the specific costs incurred – https://www.gov.uk/tax-relief-for-employees/working-at-home. This provision can apply whether you are employed, self-employed or running your own limited company.  The rules are different in each case and the extent of your claim may impact your ability to claim Principal Private Residence (PPR) relief on any capital gain made on a disposal of your home. With this in mind, we will deal with each in turn:

Employed
If you are employed then your employer will need to specify that you need to work from home. This may be included in your contract or can be proved by routine (e.g. working from home on Fridays). The costs incurred (and not reimbursed by your employer) to provide the office space can be claimed as an expense in the employment pages of your tax return.

Self Employed
If you are self employed, you may use part of your home for storage or as an office. You may claim the cost of providing the space.

Limited Company
If you run your own company, you may use part of your home for storage or as an office. You may claim the cost of providing the space. Unlike the other examples above, this income needs to be reported in the land and property section of your tax return as the company is a separate legal entity. There will be no tax liability as the amount charged to the company will equal the costs incurred, so the profit is nil.

In all cases you will forfeit the PPR on any area that is permanently used as an office or storage.  Spare bedrooms that are only used during the day as an office, and revert back to private accommodation in the evening, will allow you to claim full PPR relief on the sale of your home.

If you would like to discuss the above in more detail, or want more tax saving ideas, don’t hesitate to contact Nimbus Accounting, http://www.nimbusaccounting.com/contact-us/.