Working From Home Could Land You A Tax Bill

For the first few weeks of lockdown, millions of people were working with their laptops propped up on their kitchen tables. Once it became apparent that we would be working home for a long period of time, many chose to upgrade to a ‘home office’.

 

If you have spent the pandemic creating the ultimate home office, you are probably feeling pretty satisfied and comfortable. That satisfaction might dissipate somewhat when you try to sell your house, however — and get whacked with a tax bill. There is a chance that your new work space may be viewed by HM Revenue & Customs as a business premises, rather than a place of leisure.

 

Capital gains tax (CGT) is not levied on the sale of your main home, but it is applied to any part of your home used “exclusively for the purposes of a trade, business, profession or vocation”. Capital Gains Tax on property can range from 18% for basic rate taxpayers to 28% for higher rate taxpayers. There are also allowances that need to be factored in – at Nordens, we can do this for you. In practice, this means the surging number of Covid-19 “offices” that have sprung up all over the country as working parents desperately attempt to escape their children (or perhaps their spouses) could land home workers with an unexpected tax bill.

 

Many who wish to go on and sell their homes will be listing their sheds as a quiet, dethatched office, as they know that’s what buyers are all looking for in the Covid-19 era. But the tax inspector will also be looking at Rightmove and will write to you and say: ‘Prove that your kids played Monopoly there or we’ll say it’s an exclusive business premises — and you’re going to have to pay CGT on it.

 

Essential details to consider:

  • Whether the property was a gift or inherited
  • Any valuations required
  • Whether the property is jointly owned
  • Your tax position
  • Any improvements you have made
  • Any tax-deductible expenses you have paid out
  • Any exemptions you can claim

 

If you are not a CGT or property expert, it’s all too easy to get your calculations wrong. Pay too little and HMRC will claw it back – potentially
with interest and penalties. Why risk getting it wrong? Ask our tax experts to do the hard work for you! Contact us today on 02085300720 or email businessdevelopment@nordens.co.uk

 
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