Ltd Company Home Office Expenses

[Trojan Horse]

I am thinking of setting up a limited company to do freelance software work in evenings and weekends. Also to train for PfCO certification to carry out drone work commercially (mostly just real estate footage).

I would need to work in my home office (second living room) and occasionally my garage. I know that if I was sole trader I could claim expenses for a lot more.

However, as I have (3 bed, 2 living room, 1 kitchen) 6 room house, I could calculate fees based on 1/6th of the house hold bills (approximated based on the time spent in the office, so 90% office would be working and 10% family would use it, garage would be 10% office 90% nobody uses it) how would it work for the garage? Do I just add the garage as an extra room, making it 1/7th?

What expenses can I actually claim for? Accountants say Gas + Electric but the .gov.uk website states fixed costs would work as well: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47825

As I do not own the home (living with parents) can I just get charged a monthly bill of gas + elec from parents to the ltd co? Or can my parents charge me market value rent for the usage?

For example:
Gas+ Elec is £200 per month
Home office is 1/6th = £33.33
Usage is 90% = £30

Parents charge me £30 a month for bills? Can they not charge me for the actual rent, as I would have had to rent an office space otherwise?

Using this infographic - https://www.freeagent.com/guides/expenses/working-from-home-expenses-limited-companies/

 

[Trojan Horse]

Unless i've misunderstood you - you live with your parents??

If that's the case, you can't claim anything really. You don't own the property (it's your parents), so how can you charge a Ltd company for bills/rent when your not paying anything for the property yourself?

If anything, your parents should be charging the Ltd company for the use of the premise.

Do you need a Ltd company at this time? Why not just sole trader - What are you gaining from becoming Ltd at this time?

Yes, thats what I am saying... I outlined at the bottom of the OP. Can my parents charge the ltd company for bills and rent as I do not own the property.

I feel like learning how to manage a ltd would be better practise esp as I intend to go contracting in the future and want to limit exposure

 

[Trojan Horse]

I guess your parents could charge for it but seems a lot of hassle as they would then technically have additional income from a "rental" property. You need to factor in that they would "potentially" have to declare that income and may incur additional tax issues etc. Also house insurance considerations if they are renting to a Ltd company. Business insurance, property insurance etc?

Seems a lot of hassle to involve your parents in. Personally just don't bother with it for the tiny amount of savings you would actually have. I think your over thinking it for now.

If going Ltd, i would strongly suggest an accountant to deal with it all - however as above - Sole trader to start with, no need to jump in Ltd at this stage unless there was a strong case for it.

My parents make under the tax free limit would it wouldn't be taxed. The additional income would be around 3-4K per year which is a decent chunk.

 

[Trojan Horse]

your "potential" income is £3 to £4k a year??

If so, forget about Ltd. Totally not worth it. If you are not paying an accountant then you need to do at least the following yourself:

setup



ongoing annually



all for 3-4k a year - Sole trader, add to any other income you have, complete a tax return, job done.

No, the rent would be an additional 3-4K year...

What if anything goes wrong with the software I build? I'm personally liable as a sole trader.