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Using your home for business

If any part of your home is used exclusively for business, there may be a capital gains tax bill when you sell the home. This will not usually apply if you are an employee working from home, but could do if a substantial part of your home is set aside exclusively for the work.

If you use one or more rooms entirely for business (as an office or workshop, for example), there will be tax on part of the gain when you sell the home. You will have to agree the proportion with the tax officer, who may base it on the number of rooms you use or the market value if the business part could be sold separately. If you claim part of the mortgage interest as a business expense, the same proportion of the gain is likely to be taxable.

Tax-saving idea

If you work from home, you can avoid capital gains tax on your home when you come to sell if you ensure that you do not use part of your home exclusively for business - for example, you use a home-office also for domestic purposes. But, in that case, you will have to scale back the home-related business expenses you claim each year in line with the non-business use. You need to weigh up the likely amount of capital gains tax when you sell against the amount of business expenses involved.

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