Self employment guide - Tiscali

Whether to lease an office or work from home is the next big dilemma when becoming self-employed, although if the work involves manufacturing goods or other specialist facilities then the decision is much clearer. More than a quarter of all self-employed people work from home, according to the Barclays research.

Most choose to work from home, in the early days at least, to keep down overheads. This is especially true of individuals who spend a large proportion of their days visiting clients' premises. The opportunity to avoid a lengthy commute or spend more time with partners or young children is a common reason for choosing to become a freelancer.

But the idyllic picture masks a series of difficulties psychological and financial difficulties that homeworkers must deal with if they are to make a successful transition to self-employment.

Rooms used as an office must also have a domestic purpose if the owner is to avoid a potentially bruising encounter with the Inland Revenue. Even installing a pile of washing and an ironing board will prove the space is part of the home: otherwise, if a property is sold, the profit made on the room designated as an office will be liable for capital gains tax.

On the positive side, self-employed people can claim income tax relief on all domestic bills on space used for the business, even if what is the boardroom during the week becomes the dining room at weekends. In addition, VAT-registered ventures can claim back VAT expenses on business-related items including travel and telephone bills. It is important to keep receipts for all expenses whatever the occasion. Some entrepreneurs in this position find it convenient to install a dedicated phone line rather than struggling through pages of itemised phone bills.