Q&A: Sole trader expenses, personal tax allowance transfers and more..

I am a sole trader and I run my business from home. I am using the cash basis for preparing my accounts for tax. Can I claim expenses for running my business from home?
Under HMRC’s ‘simplified expenses’ regime, if you work more than 25 hours a month from home, you should be able to claim flat rate expenses based on the number of hours you work. Current rates are as follows:

  • between 25 and 50 hours worked per month: £10 per month
  • between 51 and 60 hours worked per month: £18 per month
  • 101 hours or more: £26 per month

If you claim the flat rate, you don’t have to work out the proportion of personal and business use for your home, e.g. how much of your utility bills are for business.
My wife and I are directors of a small company. Our two children also work for the company. Is there any advantage to the company paying for all our mobile phones?
The tax legislation provides exemptions from tax, and often National Insurance Contributions, for certain benefits-in-kind – mobile phones being one of them. Making use of the exemptions generally offers an opportunity to extract funds from a family company without triggering a tax or NIC charge. Providing the
benefit rather than the funds with which to buy the benefit saves tax. The costs are also deductible in computing the company’s profits.

So, if the company takes out a contract for four mobile phones, provides each family member with a phone, and pays the bills, the costs paid by the company will be deductible in computing taxable profits. The family members get the use of a phone tax free, meaning that they do not need to fund one from their post-tax income.

I am an employee and pay basic rate tax under PAYE each month. My wife works part-time and earns £10,000 per annum and does not pay any tax. Can I benefit from her unused personal tax allowance?
Since April 2015, it has been possible for a spouse or civil partner who is not liable above the basic rate for a tax year to transfer part of their personal allowance to their spouse or civil partner, provided that the recipient of the transfer is not liable to income tax above the basic rate. The transferor’s personal allowance will be reduced by the same amount. For 2017/18 the amount that can be transferred is £1,150. The person receiving the allowance will be entitled will be to a reduced income tax liability of up to £230 for 2017/18. Note that married couples or civil partnerships entitled to claim the married couple’s allowance are not, however, entitled to make a transfer.

Eligible couples can backdate their claim for the allowance for up to four years. This means that couples will have until 5th April 2020 to backdate their claim to the 2015/16 tax year when the allowance was first introduced.