Running a business from home [Everything you need to know]

We’ve all heard the famous stories of people like Bill Gates starting his business from his garage all those years ago. But he’s not the only one. Companies like Amazon and Google started out the same and we can only marvel at how far they’ve come since those early days.

The impact of the Covid-19 pandemic across the UK forced many people to work from home. Some even looked for the best business ideas from home.

Yet, running a business from home is not necessarily the same as working from home. And there are some important things you need to consider. Let’s take a closer look.

What constitutes running a business from home?

As you get started on your business journey, developing that novel idea that you’ve often dreamed about, you need to know what makes up running a business from home.

You first need to be a registered business, whether a sole trader or a partnership. After this, you need to consider the fact that you are operating on the basis of making a profit, not earning a salary by working from home.

As a result, your motive is different, and this needs to be factored in. As a business owner, and depending on the type of business you are running, you will also need to figure out if you’ll be hiring employees or working solo (as a plumber, electrician or beautician, for example). 

Then, there are the legalities that are involved, especially if you own the property and need to make any structural and material modifications to it in order to run your business more smoothly. Other considerations are your neighbours and the effect that your business may have on them.

If you’re only working on your computer from the kitchen table or your bed, this shouldn’t pose any problems. However, if you’ve got trucks or customers coming in regularly or you display a business sign above your property, this situation will need some more careful consideration. But we’ll get to that in a minute. 

Advantages and disadvantages

Running a business from home can come with several pros and cons. Here, we explore a few of these so that you have a better understanding of whether this is the route you really want to take.

By weighing up both sides, you’ll be able to make a more informed decision. So, without further ado, here’s our list:

Advantages

• Fewer overhead costs (such as warehousing fees)
• Potential tax deductions you can claim
• You can sell products or services locally or internationally
• Enjoy a more flexible work-life balance
• Create a family business

Disadvantages

• Conversion of space in your home may be required (with its associated permissions and added costs)
• Compliance with any regulations that pertain to the business you want to start
• Your business may outgrow your home
• You may find the experience lonely and even suffer from cabin fever. 

How to run a business from home

With all the above being said, you’ve decided that running a business from home is perfect for you.

What are your next steps? Well, according to gov.uk’s guide, there are several things you need to consider before you get started.

Permissions

We’ll start with the property itself. If you are renting your property as a tenant, you will need to get the permission of your landlord in order to carry out your business activities.

On the other hand, if you’re the owner of the property but there is a mortgage on it, you may need to speak to your lender to see if there will be any changes in the conditions of the mortgage to enable you to proceed.

Sometimes, you may need to pay additional costs for this purpose. But further to this, you will also need to determine whether your property will need to materially or substantially change (either on the interior, exterior or both) and then get permission from your local council and local planning office as well.

Regarding the local planning office, this will be required if you’re altering your home. Meanwhile, the local council permission will be needed if you are “going to get lots of customers or deliveries, you want to advertise outside your home or if you need a licence to run your business.”

Payments

Depending on the type of business you run from home, it’s important to be able to accept payments online. Processing card payments online can be done in several ways, some of which are payment requests, payment links, buttons, and tags. 

And if you are considering trying the dropshipping model, you might be interested in setting up a brand new online shop where you could choose a stylish theme, add your products and start selling on the web from the comfort of your home.

Insurance

Just because you’re working from home doesn’t mean you should only rely on home insurance. In fact, home insurance may not cover you if you are running your business from your house.

As a result, you will need to consider getting business insurance such as public liability insurance, employer liability insurance (if you plan on employing other staff apart from yourself), etc.

Tax allowances

If you are a sole trader or a partner in a partnership, you can include your business costs in your self-assessment tax return. Some costs that you can claim back on (at a flat rate for simplified allowable expenses) include things such as council tax, heating and lighting, phone calls and broadband.

The amounts that you’ll be able to disclose and then claim back will be affected by the number of hours you spend working from home. For example, consider whether you’ll be conducting your business for over 25 hours per week or less.

However, remember you may also need to pay Capital Gains Tax on that part of your property which you used for business purposes if you later decide to sell your home.

Business rates

Further to the above, you may also be required to pay business rates on that part of your property that you use for your business. However, this will depend on whether the Valuation Office Agency (VOA) “has given a rateable value to a part of your home.”

In addition, you will still be required to pay Council Tax on the remainder of the property. And last, if your property has a rateable value of £12,000 or less, you may qualify for small business rate relief. 

Concluding remarks

Running a small business from home comes with its own set of rules, regulations and requirements and you need to stay on top of these to ensure you are on the right side of the law.

As you consider growing your business, it may be necessary to move into bigger, more commercial premises. But as you start your business working from home, you need to organize your affairs before proceeding, either selling products or providing services.

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.