Creating a home office
Overview 🏡
Setting up a home office can be tax-efficient, but there are several points to consider before you start building or furnishing your workspace. Some expenses are allowable for tax purposes, while others are not. It’s also important to consider the potential Capital Gains Tax (CGT) implications when you sell your home.
🏡 Capital Gains Tax and Business Use
💡 Key point: Avoid assigning your home office for exclusive business use.
If a room in your home is used solely for business, it could affect your Principal Private Residence Relief (PPR) when you sell the property. Normally, the gain on your main home is exempt from CGT under PPR. However, any area used exclusively for business will not qualify for this exemption.
Example:
If you convert a spare bedroom into an office and never use it for personal purposes, a portion of your property’s sale value may become taxable under CGT rules.
🔗 HMRC: Private Residence Relief
💺 Furniture and Equipment
Moveable Furniture
Items such as desks, chairs, lamps, and monitors can usually be claimed as allowable business expenses, provided they are wholly, exclusively, and necessarily for business use.
- These purchases are recorded as assets on your company’s balance sheet.
- Your company can claim capital allowances on the cost.
Built-in or Fixed Furniture
Items that are physically part of your home, such as shelving, built-in desks, or electrical sockets, are not allowable business expenses. These form part of your personal property and cannot be transferred to the company if it relocates.
🧠 Design and Consultancy Costs
Design or consultancy work related to planning or decorating the home office is a grey area.
- In some cases, these costs may be treated as general business consultancy.
- However, HMRC may argue they are personal in nature, depending on the context.
If you are unsure, please speak to us before recording these costs in your accounts.
💡 Recharging Home Office Costs
Once your home office is complete, you can recharge certain ongoing expenses (such as a portion of utilities, broadband, and rent or mortgage interest) to your company. The normal homeworking expense rules apply.
🔗 See our guide: Working from Home
✅ Summary
- Do not use your home office exclusively for business to protect your CGT exemption.
- Moveable furniture and equipment are allowable business costs.
- Fixed or structural improvements are not deductible.
- Design fees may be allowable, but seek advice first.
- Once set up, the usual home-working expenses apply.