Starting as Self Employed

[decider]

Good Morning One and All.

I have begun the process of starting my own business and registering as self employed, and have a number of questions regarding tax and expenses that I am hoping you good people could help me with.

First let me explain my situation.. I am fully employed and intend to keep this job whilst working my new self employed business from home.

My questions are:

1) As I earn over the taxable allowance in my full job, I get no taxable allowance from self employment? Therefore my income tax would be 20% on anything earned in self employment?

2) I went to university, which I pay 9% tax on anything above £15k that i earn. As I earn this in my full job, this 9% is applicable to anything I earn in self employment. Meaning that my tax owing for self employment will be 29% on anything that i earn?

In terms of expenses I have been told that I can count my house and utility bills as an expense in proportion to what I use for business.

3) I have a house, which has 1x living room, 2x bedrooms, 1x kitchen, 2x toilets, 1x shed. Now I am using the spare room as an office and the shed for storage. When calculating how much of a percentage I use for business expenses, do I look at it as having 7x rooms (including kitchen & toilets) and calculate the percentage I use from this, or 5x rooms (bedrooms, living room, kitchen & shed), or do I discount the kitchen all together?
(apologies if this a bit of a trivial question, but it obviously makes a huge difference to the percentage i can count as expenses)

4) Food: Can I count any food, drink, refreshments that are to be consumed in my house as an expense?

5) Travel: I currently pay a hefty sum of money on rail fare to get to my full time job, I assume there is no way to include this as an expense?

6) My self employed job will involve visiting factories every so often, which I will do so by train. Can these tickets by counted as an expense?

7) Any tips on reducing my already hefty tax bill are greatly appreciated.


Regards,

Andy

[Homshaw]

You have not taken account of NI which could be significant

Travelling back and forward to work no

Train ticket for self employed work yes

Not food and drink for personal consumption

You do not count the toilet and kitchen as a room and only a proportion of the room used to reflect its business use

[decider]

Hi,

Thank you for your reply.

I have done some more information and this has just opened a whole can of worms.

I was going on the basis that I have 3 habital rooms and a shed, i use the spare room and shed for my business, therefore i would be able to deduct 50% of my mortgage and rent. However from research this just leads to even more questions.

Does the spare room (my office) and the shed (storage) I use for business have to be completely empty of everything else not business related to count as being for business wholly and exclusively. In this case can 50% of my mortgage and rent be considered tax deductible from my profits.

Or does time in use come into it? As being full time employed I only use it outside of work hours and weekends?

This room will also be used for storage as well though, so this will be permanent as will my shed. How does this work?

As these rooms are permanent and not used for anything else, can i literally say 50% of my housing bills can be deducted?

[Homshaw]

50% is a figure that is unlikely to be acceptable to HMRC

They accept £150 a year without justification higher if you do the exercise you suggest.

If you put a room as 100% usage you coud run into capital gains tax problems if the housing market ever picks up

[decider]

Thank you for your replies and help.

Everything I read is quite vague regarding this issue, the HMRC has examples of various situations regarding this, but they do not seem overly helpful.

My situation would be that

I have 3 habital rooms in my house, 1x of these will have a home office in and also storage of items. I also have a shed which will be used for storage and also have a small work bench for repairing items that I sell.

I would use this office for about 2-3 hours per week day and 4-5 hours on saturday and sunday by myself.

This room is very rarely used by me for anything else, maybe 3 or 4 times a year for someone to stay in.

My total house cost is £350 per month, Gas & Elec probably £65, Water probably £35.

Does anyone know how HMRC would see this situation as the examples they give are conflicting with each other.