The Tax Benefits of Working from Home

If you run your business from your home, you will not only save on overheads, there are also a few tax perks to be had. You do, of course, need to know the rules. HMRC is strict about what constitutes legitimate expenses that can be claimed and deducted from the taxable income of the business.

If you use a part of your home as an office, you can claim a percentage of your lighting and heating utilities as expenses. Likewise you can claim for business telephone calls and broadband internet use. When you use a car for work, you will not have dead mileage that you cannot claim for, as your work base is at your home. You can claim for the regular supplies you need just as you would in bespoke business premises.

If you employ people working from their homes, be sure that any expenses you pay them are completely work related, otherwise over and above a tax free amount of £3 a week, they cannot be claimed.

When you first set up an office at home, the fixed assets you need to purchase will go into your business accounts.

There are complex rules about what you can set against tax for these items, and how to depreciate them when your year end accounts are completed. You may need to get professional help so that you do not fall foul of HRMC rules, treating the fees for this as expenses of course.

Taking professional advice is vital to ensure you are maximising your taxable expenses as a business; it could mean the difference between breaking even, and making a profit.

The Benefits of On-Line Banking for Small Businesses

If you haven’t switched to on-line banking yet, now is the time to give it some serious consideration. There are many benefits to gain from banking on-line and this article explores the main ones.

If you have set up direct debits for your business credit cards or any other regular payments, it is so easy to check your available cash and make sure nothing will take you into the red by doing so online. This is even more important if you are operating on an arranged overdraft as the penalties for exceeding it can be very severe.

Other benefits can include savings on charges. They can be lower than on ordinary accounts because on-line bank accounts require less staff time to maintain them and deal with customers. Some of them also offer higher interest rates.

It is also so convenient to be able to order statements and cheque books, move money around and make payments as you sit in front of the computer.

Many companies and individuals now make payments electronically, and some of the larger businesses are beginning to refuse cheque payments. Satisfactory credit control can make the difference between success and failure in a small business and on-line banking makes this much easier.

All you need to do is log in to your account and check who has paid you by the due date. Then set your normal procedures in place for any offenders. Chase them early, and recognise where problems might arise so you can make the right decisions at the right time.

VAT Increase on New Year’s Day

If your business is VAT registered don’t forget that the standard rate will change on 1 January 2010. It was reduced to 15% in December 2008 in an effort to boost consumer sales but will rise to 17.5% again as soon as the calendar turns to 2010.

The date of the change could mean headaches for businesses hoping to be busy with New Year sales. To avoid last-minute problems, ensure you are fully prepared for the change well in advance.

The basic rules are that you need to apply the 17.5% rate to your prices from 1st January, and if you issue VAT invoices, you must charge the new rate on all invoices raised on or after that date.

As with most tax rules, there are a number of exceptions for circumstances that do not fit neatly into the main guidelines. For example, owners of clubs and restaurants who are planning New Year’s Eve parties will be pleased to know there are special arrangements for businesses that will be trading before and after midnight on 31 December 2009.

If you are unsure about any aspect of the change contact HM Revenue & Customs or your bookkeeper as soon as possible.