To run a successful home based business, you have to be dedicated and persistent. There's more to it than that though. Without understanding local tax bodies, rates and other implications, you could end up in some pretty hot water. Tax implications vary from one country to the next. What's true in one country may not be true in another. Before you get serious about running a home based business, you need to educate yourself about local tax laws and be prepared to handle your obligations in a timely and legal manner. Learn more about this important topic below.
Working from Home in the UK
Laws regarding taxes are complicated, and that's as true in the UK as it is anywhere else. There are no one-size-fits-all solutions. A variety of factors will determine how much you'll ultimately have to pay. With these points in mind, you should hire an accountant. His advice will be worth every penny.
You may enjoy special breaks on taxes in the UK by working from home. For example, if your company is VAT registered, you may be able to claim back VAT on supplies that you use to run your business. You may also be eligible for relief on domestic bills for parts of your home that are used to conduct your business. Once again, an experienced accountant can help you determine the kinds of relief that apply to you.
Working from Home in the US
As in the United Kingdom, you may be eligible for special breaks on your taxes by working from home in the US. However, claiming a home based business deduction can be a red flag for an audit. Proceed with caution.
Make sure to take self-employment taxes into consideration when working from home. When you have an employer, approximately 15 percent of what you earn is paid in taxes and not reflected on your pay stub. These taxes, along with Medicaid, social security and other expenses, all make up self-employment taxes. Self-employed people often overlook these taxes, and they get slapped with huge bills, fees and penalties as a result.
Working from Home Elsewhere in the World
What if you live elsewhere and want to work from home? It's up to you to learn about the local tax bodies and rates. Claiming ignorance is not an option. No matter where you live, the government is going to expect to be paid. It's far better to be fully aware of what's expected from the start than it is to learn as you go. It's always worthwhile to hire an experienced tax accountant wherever you are. By doing so, you'll be able to meet your obligations and could possibly reduce the amount that you owe too.