This year’s Coronavirus outbreak has seen a high numbers of office workers instead set up at home to carry out their work responsibilities.
For employees, their decision may have been made for them by company managers, while for others it may simply be a personal preference.
But for the self-employed, including partnerships, businesses and sole traders, working from home may have been a part of your working life for some time.
You may even be aware of some of the tax incentives available to those who use a room in their house as an office.
However, it is also important to be aware of the tax implications that this may have should you choose to sell your home.
Capital gains tax refers to the tax on the profit of an asset you sell that has increased in value. If you make a gain or profit then that is the amount that is taxable.
Generally, you will not incur a capital gains tax bill when selling your main home, but there are several rules and regulations that you should be aware of, especially if you’ve used it as your place of work.
In working terms, if there is a room in a house used exclusively for work, then any capital gain made on the sale of the property would incur a bill.
The sum payable varies depending on whether you’re a basic-rate or higher-rate taxpayer and also depends on what the tax-free allowance is for the financial year in question.
How can I avoid this?
You can avoid paying capital gains tax if you can show that you worked from home as a direct result of your usual office space being unavailable.
Additionally, if the room is used for a range of purposes as well as work then you will not be expected to pay it.
For example, if you’re working out of a room that is also a bedroom or a dining room then you won’t be affected..
You can also avoid the bill if your home is owned jointly with another person.
If you are married or in a civil partnership then you are to transfer assets to each other without capital gains tax being charged.
Do you work form home? Cooper Accounting can guide you through the tax incentives and options available.
Get in touch for an informal chat.