One of the perks of running your own business is that you can work from wherever you want. For many people, working from home is what they want to do.
And why not? It means no need to pay for office space, no commuting, and you can work in your pyjamas if you want. Unless you have clients of course, that would be a bit weird.
So there are certainly advantages to working from home as a small business owner, but what about the disadvantages? And is it even possible to run a small business from home?
These and other frequently asked questions about running a small business from home will be answered in this article.
Can you run your small business from home?
First things first: yes, you can run your business from home. However, depending on what your business is, you might have to follow certain rules and regulations.
Especially if you own a limited company, running your business from home comes with certain challenges. To set up a limited company you have to provide a business address.
This address will be made publicly available on the Companies House website. Having your home address out in the open for everyone to see might not be the best idea. Whether you live alone or with a partner or your family, you might want to keep your private life separate from the business.
You don’t have to use your home address though, as there are other options, which we discuss in our article about what you can use as a business address. It’s worth checking it out if you are considering running your business from home.
As a sole trader, you won’t have this problem, because you don’t have to register your business with Companies House. So you can set up a desk and computer in your spare room to run your business.
However, if you want to employ staff, get visits from clients or customers, things will get more complicated. This leads us to our next question…
Do you need permission to run a business from home?
Generally speaking, no. However, if you are renting, you will have to check with your landlord. And if you own your home but have a mortgage, you have to check with your lender. You might also need permission from your local council.
Both the lender or landlord have to give you permission to run your business from home. If all you need is a desk with a computer to conduct your business from the comforts of your own home, most landlords and lenders won’t have a problem with this.
However, if you are receiving visitors, clients or have staff working at your home, the situation might look different.
If you’ll get a lot of customers/delivers coming to your business, or you want to have a sign outside your home to advertise your business, you need to get permission from your local council.
Depending on the type of business, you might need a licence to run it, which means again, you will need to get permission from your local council.
So before you start running your business from home, make sure you have the right permissions in place.
What are the pros and cons of running a small business from home?
Before you decide to start running your business from home, you should consider the advantages and disadvantages very carefully. After all, you want to make sure that it’s the right decision for you and your venture.
Benefits of running your business from home:
- Lower running costs – you save money on costs like rent, gas and electric, etc.
- No commuting – spend more time running your business and with your loved ones
- More tax efficient – you can take advantage of tax benefits
- You could avoid business rates – this will depend on your set-up and type of business
- Potentially better work/life balance
- Less distractions – depending on how busy your home is
- You can arrange your working hours around your private life
Drawbacks of running your business from home:
- Lack of privacy – if you run a limited company you have to provide a business address that will be made public
- Potentially worse work/life balance – you might work long hours
- Less space – depending on your business, you might struggle with space
- Lack of social interaction – you might feel isolated and struggle with not meeting people
- Lack of networking oportunities
- Seen as less professional – depending on your business, clients and customers might have a less professional image of you
To make running a small business from home successful, you have to ensure that you find ways to mitigate any of these drawbacks.
For example, you could work from a coworking space once a week to get social interactions and networking opportunities.
Do you need planning permission for a home office?
The typical answer is no. You do not need planning permission for a home office, unless you meet any of the below criteria:
- You have visitors to your property, including clients, customers, or staff.
- You store items related to your business outside your property.
- You have a sign or advertisement for your business outside your property.
- You are planning too many structural changes to your home.
If one or more of the above points applies to your business, you will need to apply for planning permission.
Find out more by reading our article about whether you need planning permission for your home office.
Can I use a shed or garden house as a home office?
Running a small business from home can be a great way to keep costs down, but it also means that you can’t get away from it, even outside of office hours. This can have a negative impact on your work/life balance.
One way to ensure you can properly shut off from work is by having a dedicated office away from the main house. A shed or garden house can be the ideal place to work from home without losing your work/life balance.
However, if you only use these outbuildings as your office, you will need planning permission to build your home office. Even if you might use it every now and again to entertain friends, if you work there five days a week, it is classed as a dedicated home office and will need planning permission.
But if you plan to only use it every now and then, for example when you have a Zoom meeting with a client, and the rest of the time your children use it as a play room, you wouldn’t need planning permission.
So it will depend on exactly how you are planning to use the shed or summer house to establish if you need planning permission.
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Does building a home office affect business rates?
This depends on the type of premises that you build and what it’s used for. The general rule is that if you use the space exclusively for business purposes, you must pay business rates.
So for example, if you convert a garage into a hairdressing salon, or build a photography studio as an extension, you will be liable for business rates.
This also applies if your premises are used to entertain or see clients, or if you have staff entering your premises to work.
Business rates are calculated by the Valuation Office Agency (VOA), which uses the ‘rateable value’ of your property value (how much it would cost to rate per year) multiplied by a standard or small business multiplier. You can find out more about business rates in our complete guide here.
If you use a spare room or the kitchen as your office from which you work, and you don’t have staff or any other visitors, you wouldn’t have to pay business rates.
Does home contents insurance cover my business?
Probably not! But you will have to check your policy cover to find out the exact answer here.
Most building and contents insurance covers personal items, rather than business equipment. However, you could have a small element of cover for accidental loss of some equipment at home, such as a personal laptop you use to run your business.
However, any dedicated business items or equipment that you have in your home won’t be covered by a standard policy. To get them covered, you must contact your provider to add business cover – or even take out a new policy to get that level of protection.
Do you need insurance to run a business from home?
Your business isn’t covered by normal home and contents insurance. But is it a requirement to take out business insurance when you work at home?
Unless you have specific contracts that require insurance (like public liability insurance or cyber and data insurance), you don’t need to take out any insurance when working from home. But… that doesn’t mean it’s the best idea.
Fundamentally, if you’re not insured, you’re taking a gamble that the worst-case scenario doesn’t happen. Our official recommendation is always to err on the side of caution and carefully consider if business insurance might be right for you before making a complete decision.
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Does having a home office affect mortgage agreements?
If you’re simply working from home, without seeing clients or building dedicated workspaces for your business – then your mortgage agreement will remain unaffected.
The only time mortgage lenders will be interested in your home business is if 40% of your property is used for commercial purposes, i.e. if you’ve transformed your downstairs into a store or a nail clinic. In this case, your business use can change how your property is classified, changing it from a residential property to a commercial one.
This will affect your mortgage rates and agreements – as your lenders will have to change the property type on your agreement and calculate new rates from here.
Can I register my business using a home address?
Yes, you can use your home address as your business address when registering a limited company or LLP. However, you might want to avoid this option to protect your privacy, as this address will be publicly available on the Companies House online register for anyone to access and use.
If you don’t like the sound of this, you must use an alternative address where all your official communication will be sent. One of the best solutions to this is to use a company formation agent, who will provide an address for you to use and scan, forward and email all communication to you.
Not sure where to find a company formation agent? Don’t worry – we’ve already tested and reviewed the best company formation agents in the UK for a quick and stress-free experience.
Recommended Address Service:
If you’re looking for an affordable address service for your business, we recommend 1st Formations.
They offer Registered Office, Service, and Business Address services either as part of a company formation package or as a standalone service.
Click here to visit their site
Make running your small business from home a success
Now that you have the answer to frequently asked questions about conducting your business from home, you have all you need to know to make a decision that is right for you.
If you want tips to make running your company from home, read our in-depth guide to running your business from home.
For all other business tips, news and advice, keep up to date with Business4Beginners.
