Tax return question about percentage of rent?
Answers:
The usual method of calculating a deduction for use of part of a home is to use a proportion relating to the size of the home used for business. Therefore, if you put aside one room for business and you have 3 bedrooms and two reception rooms, then you claim for one fifth of rent, Council Tax, water, heat and light. You dont count kitchens and bathrooms as you need to eat and go to the loo whether you use the house for business or not.
I think Thin is talking about the USA, not the UK, where what he says does not apply.
EDIT: Tax Chap - the questioner states he is renting the house, so CGT doesnt apply.
http://www.mckenzielaw.com/businesshome.
Keep really good records. Deducting a home office (especially in rented property) will move you up towards the top of the list of likely audits. You might want to be sure the property you are renting is zoned to permit business, and that the terms of your business license do not preclude deduction.
It would seem that you are not using an accountant as these are issues he/she would have examined automatically, amongst other things. His/her fees are also tax deductible. I do recommend getting a qualified accountant.
You have not said whether you you are employed or self-employed, which is important as the tax treatment differs.
Based on the assumption that you are self-employed, how much you can set off against your income really depends to a great extent on how much of your home is used for work and for what length of time.
An earlier answer suggesting you divide the work rooms into the total number of living area rooms is fine, provided the work rooms are used primarily for work. Otherwise you'll need to time apportion as well. For example, you have 10 rooms of which 1 is used for work. It is also your main bedroom for 1/3 of every day. In this example, you would charge 1/10 of the relevant overheads but restrict the answer to the amount of time the room is used for business, i.e. 2/3rds.
Now, using the above example, if you have a room that you set aside specifically as an office, then you can claim the 1/10 in full.
What general home expenses can you claim for?
Mortgage Interest; Rent; Council Tax; Buildings (not Contents) Insurance; Gas; Electric. Just a few examples.
BEWARE!!
If you own the home, as opposed to renting it, then when you come to sell it, that area being claimed as Home Office becomes a business asset and is thus chargeable to Capital Gains Tax (CGT).
The current personal annual exemption is £9,200 (double it for a jointly owned asset with another person). Therefore, again using the above example, if you sell your home, you are also selling 1/10 as a business asset. To have to start paying CGT, you will have had to make a gain in excess of £92,000 (£184,000 if jointly owned with another person) FOR THE PERIOD YOU WERE CLAIMING HOME OFFICE RELIEF.
The way round this is to NEVER claim that ANY room is ONLY for business. In other words, if you have an office, put in a stereo or tv or anything which is non-work related. That way, the room cannot be said to be wholly and exclusively for business purposes and the CGT aspect disappears.
I recommend looking at the section of the HMRC Business Income Manual which covers use of Home - http://www.hmrc.gov.uk/manuals/bimmanual... - BIM47800 - Specific deductions: use of home: contents.
Bear in mind that these manuals are not the law, only HMRC interpretation of the law.
You take the number of rooms in the house excluding kitchen and bathrooms and then you can claim half of the bills for 1 room.
i.e. 3 bedrooms and 2 reception rooms = 5 rooms so you can claim 1/10 of your bills, gas electric council tax etc
This is what I have done for a number of years the reasoning being from my accountant that the Revenue cannot challenge half use of one room as easily as they might challenge full use.
e.g. you might use a spare bedroom as an office or you might spend some time doing personal stuff in a study like using Banswer.com !
Fengirl's answer suggests claiming all the bills for the room you use i.e. 1/5th in the example but it is my understanding that this could be challenged by the Revenue more easily.
The answers post by the user, for information only, BAnswer.com does not guarantee the right.
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