What are the laws on working from home?

Question

I work partime and wondered if I could use my past experience in knitting and crochet to teach beginners from home. Do I have to submit this extra pocket money to the revenue? What do I have to do to do this without breaking the law? I do possess a enhance disclosure certificate and have no charges. Please advise. Appreciate replies from serious people, thanks

Answer 1

You may be better off posting this question in a different category, such as Small Business.  

In general, working at home does not exempt you from any taxes on any income, but some government jurisdictions do not spend enough money on enforcement, so that small operators often get away with not paying their fair share of taxes, so it is a gamble whether or not you can be a tax cheat & get away with it.

When we are an employee, the employer takes care of most of our tax collection, so we not have to bother with it, but when we are self-employed, then we have the responsibility to collect all the taxes on ourselves, and file all the paperwork, that the government would do for us.

There can be taxes on self-employed that are different from those on employees, so you cannot use recent paperwork from an employer as a total guide to the requirements.

This also varies by geography of government.

There are rules in some cities that do not apply in others.

If you are totally inexperienced in this manner, I suggest you consult a financial tax adviser, such as the places that help people file their income taxes.  The cost here will be minimal to you, but out of it, you will get copy of all the forms that need to be filed with list of all the taxing authorities, which have to be filed monthly, quarterly, annually, whatever; and whether there are any caps or minimums, where you do not have to file if your income is outside of some specified range.

There is also the question of whether you need to have some kind of business license to operate from your home, if the zoning even permits you to have a business at your home address, what insurance is appropriate, how you will handle the money so that it does not put you at great risk of being mugged, and other standard questions that apply to any small business.

That kind of question can often be answered by a visit to your local Business persons association, such as a Chamber of Commerce.  It probably would help if you joined several such associations.

But you did not ask that kind of question.  Knowing right questions to ask, like your paperwork responsibilities, in case the government wants to audit your 2008 operations, but waits until 2015 to demand to see the paperwork.

Answer 2

The first question I would ask is what country you live in and what state you live in if you live in the US.

In the US, you are required to report any income you receive to the IRS, regardless of whether it is "pocket money" you received from a home business or not.  

Home business must follow certain guidelines in the US.  You will also have to consider any HOA covenants and regulations that may apply to your property.

Generally, in the US, if you run a business out of your home, depending on the state you live in, you will likely have certain restrictions like not being able to use heavy machinery, not make noise over a certain level, not use machinery that emits noxious fumes, and not having employees who come to the site to work, and you will have parking and other issues to deal with.  

If it is just you and you have, say, an internet business, or hold small classes as you indicate you want to do, you may deduct certain expenses from your taxes,  such as a percentage of the use of your home office and home computer.  But remember, if you claim expenses, you have to claim the income or you will be audited.  

I hope this helps you.