Tax And Working From Home

Working from home for the first time can be very daunting, but in reality, once the basics have been covered, it can be a very simply process.

Firstly, I would recommend that you contact H.M.R.C. as soon as you begin trading, tell them that you are liable for income tax and class 4 national insurance and that you want to register as being self employed.

After this, it would be wise to open a business bank account into which you will deposit your income and from it will withdraw bonafide business expenses.

In order to help keep control of your finances, it would be wise to keep a cashbook which is if kept properly an upto date total of your cash position, with your various income streams and various expenses all analysed separetely. By keeping a cashbook, you will either make life easier for your accountant at the end of the finanical year (hence keeping your costs down), or you will make life easier for yourself by having your income and expenditure analysed ready for you to complete your own self assessment income tax return.

As a sole trader working from home, you will be entitled to a proportion of your heat and light bills. Floor area is usually an acceptable way of apportioning costs, but don't forget that if a room has personal use as well as business use, then a further apportionment will have to be done on a time basis. An alternative would be to claim a work from home allowance which currently stands at £3 per week.

By: John D Carter

Article Directory: http://www.articledashboard.com

Our home based payroll business which calculates nanny tax operates using these principles.