Converted a room or built a home office? Beware of the tax implications!
As a result of the pandemic, many people have created a home office. Whether that be by converting a room or building an office in the garden. However, many are unaware of the potential tax implications that may affect them.
Statistics show one million workers have paid for a shed or similar building to use as an office since the beginning of lockdown.
Capital Gains Tax (CGT) is not applied on the sale of a residential property. However, it is applied to any part of your home that is used “exclusively for the purpose of a trade, business, profession or vocation”.
So, if you have been using a room or building exclusively for this purpose, when you come to sell the property you may be liable to CGT on that proportion of the house.
There are ways to avoid HMRC deeming this to be a business premises. Firstly, avoid bragging about your new ‘office shed’ on social media! Secondly, do not make it exclusively for business purposes. Use the space as a family or games room in the evening. Add a sofa for example so you can relax in there as well as work.