Home-Based Businesses: Tax Deductions For Your Home-Based Business

Home-Based Businesses: Tax Deductions For Your Home-Based Business
One of the many advantages of working from home is that you
are legally entitled to claim tax exemption on some of your
everyday household bills provided the amounts you claim are
legitimate costs involved in running your home-based
business.

If you work at home, you can claim exemption on a
percentage of your mortgage interest (but not capital
repayments), insurance, maintenance, lighting and heating.
If you have a whole room set aside exclusively to use for
your business, you can claim a proportion of your household
expenses in respect of the whole room. If the room is 20%
of your living space, you can claim exemption on 20% of the
mortgage interest, lighting and heating etc.

If you use a room that doubles for another purpose, or if
you only work at home part time, it is wise to take advice
from your tax office on the correct way to work out your
entitlement. If you get the calculation wrong and this
comes to light at a later date, you will have to repay any
underpaid tax (plus any interest due) and you will have the
hassle of going over your records to check and revise the
figures. It is much better to get this right when you
start.

If you use the phone and Internet for your work, you can
claim a percentage of the cost of your phone line and
calls. If you have broadband you can claim whatever
percentage of the cost is exclusively for your home-based
business. If you have a separate dedicated phone line for
your business, you can claim exemption on the full amount
you pay for the service. If you have a broadband
connection that is used exclusively for your business,
again, you can claim the whole cost. It is important that
you don't claim the whole cost of any service that you
share with your family or that you use for social/domestic
purposes.

If you use the family vehicle for your business, you can
claim the relevant proportion of running costs and fuel.
Note, however, that you will need to be able to provide
evidence of your use of the vehicle for business purposes.

Some home-based business owners fail to take full advantage
of the tax relief available to them. If you are a small
business owner and do your tax returns yourself without the
aid of an accountant, you might think that claiming these
tax benefits will be difficult and complicated or that it
would be inviting an investigation by the tax office.
These fears are completely unfounded. Running a small
business from home might be a new thing for you but it
holds no novelty for the taxman, he is quite used to seeing
tax returns from self employed home-based business owners.
Your tax office will give you full details of how to
calculate your entitlement to tax relief. There are plenty
of leaflets available to help you and in some areas, the
local tax office will run special workshops to help newly
self employed persons to understand how to claim tax
exemption and exactly what they can legitimately claim.

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Taxation might be inevitable but there is some good news...
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