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Determining work from home tax status

Check your tax status

Deciding to work from home is a big change from going to an office every day. But the change of commute is probably the least of your concerns. Taxes and tax status are going to be among the first things things to look into.

First of all, you will need to consider your tax status, which could well have changed with your circumstances.

If you are working for yourself, are responsible for the success or failure of your enterprise and taking on a number of projects from different companies, the chances are that you are self-employed. If this is the case, then it is important to inform HM Revenue & Customs (HMRC) that you are working for yourself as soon as possible; failure to do so can result in penalties at a later stage.

You can do this quickly by filling in an online form at the HMRC website, or you can make a phone call if you’d rather discuss the issue with someone. Either way, aim to be registered within around three months of becoming self-employed or you risk facing a fine from the tax authorities.

Of course you could also be working from home but still be employed by a separate company based elsewhere. In this situation you are not self-employed and that your tax issues are being handled by your employer. 

HMRC will look at several aspects of your work verify that you are employed, rather than self-employed. For instance (i) if you have to do the work yourself, rather than being able to contract out; (ii) if you are working for one person/organisation at a time who is basically in charge of what you do; (iii) if you can be told where, how and when you work; and (iv) whether you are required to work a set number of hours per period.

Check your payslips to make sure that National Insurance and income tax are being deducted as required. If not, you could face an unexpected and unwelcome tax bill a few months down the line.

If in doubt, speak to HMRC or a local accountant, or preferably both.

Once you’ve determined your tax status, make sure you stay on top of your record keeping so that you’re prepared for the end of the tax year.

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