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Posted by Shelley Waite, Jun 24 2012 5:25PM

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Working from home - rent & council tax as allowable expenses

Hi folks,

Having read the following pages from the HMRC website, I am a bit confused as to what portion of my rent/council tax is allowable. I rent a 1 bed house (Band A with single occupancy discount). It has a bedroom, living room, kitchen and bathroom. I have turned the bedroom into a dedicated treatment room for my Massage Therapy business (I sleep on a sofa-bed, which is obviously a sofa for when clients come round).

At the moment, the business is in its infancy and I am working it around a full-time job, so I will only have 1-2 clients per week to start, which will (hopefully!) increase steadily over time.

So what percentage can I claim as allowable??

http://www.hmrc.gov.uk/manuals/bimmanual/BIM46840.htm

http://www.hmrc.gov.uk/manuals/bimmanual/BIM47820.htm

Thanks for any help on this! :-)
Nicki Lee
Jun 24 2012 6:36PM
Hi,
It's my understanding that you may charge a proportion, for example I have a 5 room home not including bathroom and use 1 room for work, so I charge 20% of council tax, house insurance, but not the mortgage as I believe that would then cause a mess when selling with capital gains. I also use another room as an office but don't charge that, as using that large a proportion would also cause problems, including with local authority and rates.
I've found over the years when I have a question as I do my own taxes, if I call the HRMC info line they are very helpful. I would put your question directly to them to be on the safe side.
Best of luck,
Nicki
Julie Egginton
Jun 28 2012 12:41PM
Hi Shelley,

Great news that you are starting up your own business. It can be challenging whilst still working full time, however very rewarding. Playing Devils Advocate here - have you checked your tenancy agreement? You may find that the landlord will not allow a business to be operated from the premises or that you need to get permission, as it will impact on their buildings insurance/mortgage.
Shelley Waite
Jul 1 2012 8:32PM
Hi Nikki, thanks for your advice. that is the general consensus of people that I have asked - take a percentage.

Although Julie's comments have made me wonder about the rent - my Landlady knows what I'm doing (and is actually quite supportive of it) but I'm pretty sure, like me, she wouldn't have thought it would affect her mortgage - how so? And would this also be the case if I were to claim a % of the council tax but not the rent?
Julie Egginton
Jul 2 2012 8:58AM
Hi Shelley, Most mortgage companies need to know if there's a change of use to the property, as they have a vested interest in the property until the mortgage has been paid, and it may be the mortgage was given on the basis it would be a residential property only. The area it is most likely to impact on is insurance as a change of use (to part residential, part business) may invalidate the landlady's buildings insurance. It may be worth her seeing a Business Adviser at Business Link or the Citizen's Advice Bureau to get some impartial advice.

It's great that she supports what you're doing, however both you and she need to ensure you're both legally protected should anything adverse happen. It's always better to prepare for the worst, and expect the best.

As I said, being Devil's Advocate here, and it is yours and your landlady's choice as to what action you both wish to take.

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