Working From a Home Gym as a Sole Trader: Simplified Expenses, Equipment Costs and Capital Gains Tax on Your Home

A personal trainer or coach who works from a garage, spare room or garden gym has a business cost question that ordinary home gym owners do not: what can be set against tax, and what happens to tax when the home is later sold. HM Revenue and Customs (HMRC) publishes GOV.UK guidance on running a business from home, on simplified expenses and on Capital Gains Tax when a home is sold. This guide summarises those pages, which are written for UK taxpayers and refer to the local assessor in Scotland where business rates are concerned. The figures were taken from the GOV.UK pages at the time of writing, and readers should check the pages for the current position. It is general information, not tax advice.

Who can use simplified expenses

GOV.UK says simplified expenses are a way of calculating some business costs using flat rates instead of working out actual costs. They can be used by sole traders and by business partnerships with no companies as partners. Limited companies, and partnerships that include a limited company, cannot use them. They are optional.

Flat rates are available for three things: some vehicle costs, working from home and living at business premises. Every other expense has to be calculated from actual costs. For a coach, the working-from-home rate is the relevant one.

The working-from-home flat rate

The working-from-home rate replaces the job of working out what share of household bills relates to business use. GOV.UK says a business must work 25 hours or more a month from home to use it. The monthly flat rate depends on the hours:

• 25 to 50 hours: £10 a month.
• 51 to 100 hours: £18 a month.
• 101 hours or more: £26 a month.

The flat rate does not include telephone or internet costs, which can be claimed separately as the business proportion of actual costs. GOV.UK gives an example of someone working 40 hours a month for ten months and 60 hours in two months, who could claim £136 in total. Hours worked at home are recorded over the year, and GOV.UK offers a checker to compare the flat rate with actual costs.

Equipment and other costs

GOV.UK’s expenses guidance for the self-employed lists insurance, premises costs such as heating, lighting and business rates, and advertising among the claimable business costs. Equipment is treated differently. Under traditional accounting, GOV.UK says capital allowances are claimed when a business buys equipment and machinery. Under the cash basis, items bought and kept for the business, other than a car, are claimed as ordinary allowable expenses. A business using the £1,000 tax-free trading allowance cannot claim expenses or capital allowances. Where an item is used for both business and personal reasons, only the business share can be claimed, which matters for a rack or bench the whole household uses.

Business rates are a separate matter. GOV.UK says a business may have to pay business rates on the part of a property used for business, depending on whether the Valuation Office Agency, or the local assessor in Scotland, has given a rateable value to that part. The article on business rates and the VOA covers that, while the article on health and safety when coaching clients covers duties to visitors.

Capital Gains Tax when the home is sold

GOV.UK’s guidance on selling a home says Private Residence Relief applies automatically, so no Capital Gains Tax is due, only if all of a list of conditions are met. They include that the home has been the owner’s main home for the whole time it has been owned, that no part has been let out (a lodger does not count), that the grounds and buildings are under 5,000 square metres, and that no part has been used exclusively for business purposes. GOV.UK says using a room as a temporary or occasional office does not count as exclusive business use.

What this means for a gym is a question of use. A room used only for client sessions is more likely to be used exclusively for business than a room the household also trains in. GOV.UK sets out the test in those words, so anyone planning a dedicated client-only studio in the main house or garden should check the position before building and again before selling. The guide to selling a house with a home gym fitted covers fixtures and fittings.

Permissions and insurance

The GOV.UK page on running a business from home says a business may need permission from a mortgage provider or landlord, the local planning authority for major alterations, and the local council where customer numbers, deliveries, outside advertising or licences are involved. It also says home insurance may not cover customers visiting. The guides to mortgage consent for building work and to insuring home gym equipment go into those in more detail.

Frequently asked questions

Can a limited company use the flat rate? No. GOV.UK says simplified expenses are for sole traders and partnerships without company partners.

Will coaching from home always trigger Capital Gains Tax on sale? Not necessarily. The relief is lost where a part of the home is used exclusively for business, and occasional office use is treated differently.

The bottom line

For a sole trader coaching from a home gym, GOV.UK’s flat rate of £10, £18 or £26 a month for 25 or more hours of home working is an optional shortcut, while equipment and other costs are claimed from actual figures under the rules for the accounting method used. Capital Gains Tax on a later sale depends on whether any part of the home has been used exclusively for business, so a client-only studio is worth planning with that in mind. This is general information, and a tax adviser or HMRC should be asked about individual circumstances.

Sources

• GOV.UK, “Simplified expenses if you’re self-employed: Overview”
• GOV.UK, “Simplified expenses if you’re self-employed: Working from home”
• GOV.UK, “Expenses if you’re self-employed”
• GOV.UK, “Tax when you sell your home”
• GOV.UK, “Running a business from home”