19 DEC 2023 12 MIN READ

What to consider when starting a business from your home?

If you’re planning to start or are already running a business from your home, this is your guide to making sure everything is above board.

What qualifies as running a business from home?

It might feel like the small graphic designing or crafting that you’re doing in your living room isn’t big enough to be considered a business, but according to the UK GOV, you’re probably running a business if you:

sell goods or services to make a profit

run your business for yourself and take responsibility for its success or failure

can decide how, where and when you do your work

provide the main items of equipment to do your work

There’s some more criteria listed online and even a useful checker tool. No matter how small time your home business may feel, it’s important to understand that it needs to be taken care of in the same way any big business would be.

What are the pros and cons of starting a business from home?

If you’re thinking about starting a business from home, it’s important to weight up the advantages and disadvantages! We’ve gathered a few of the main benefits and drawbacks:

Advantages of a home business

  • A more flexible work-life balance which can help if you have carer or child responsibilities
  • Lower operating costs as there’s no shopfront, studio or space (aside from one you already pay for) to manage.
  • Lower operating costs and investment can mean less startup cash needed to get your business started.
  • No commute
  • Can eat at home rather than eating food from restaurants during lunch.
  • You have full control of your work environment – music, temperature, lighting, setup, etc.

Disadvantages of a home business

  • Can end up cluttering your home with inventory or supplies for your business.
  • Working from home can be lonely if you enjoy having colleagues and networking may be more difficult.
  • It can be hard to stop working when it’s at home with you all the time.
  • You need to make sure your home space can comply with any regulations related to the business you’re running.
  • It may be distracting if you have kids, pets or even just chores at home that need doing when you also need to work.
  • Scaling the business up when you have a limited space to do it in can be complicated. Starting a business from home may limit your growth trajectory.

Can you run a business from home?

Everyone’s home space and set up is different, so here’s a few things you should think about when deciding whether or not your home is an appropriate space for starting your business.

Consider if you have the needed space to run a business, if you have the space for any stock and materials and if this will interfere with your living areas at all. If you live alone, this may be easier to work out, but if you live with other people, you’ll want to speak to them about how running a business from your shared living space will work. If a specific part of your home is designated as a working space, it is possible that you’ll be subject to business rates.

If you’ll be sending out a lot of completed products to customers, do you have a delivery service in close proximity which will make this practical? If you frequently need to get supplies, do you live near somewhere that you can pick them up regularly?

Finally, businesses can be disruptive through noises, messy workshop spaces, or clients coming and going. If this is going to create serious disturbances, it may cause problems with your neighbours, so you’ll want to minimise how much your business operations affect others.

What type of businesses can I run from home?

If you’re thinking about starting a business from home, it can be hard to decide what to do. If you’re stuck for ideas, here’s how you can start coming up with ideas:

Write down your skills and interests – the things you both like to do an are very good at. If these immediately bring up a business idea, great! If not try searching online for business ideas connected to your interest.

Sort through the ideas that you’ve come up with or searched and eliminate any of the ones that wouldn’t be suitable for running from your home.

Once you have a few you like, start building on them to see if there’s a way you can make it more niche and special. You’ll want to do some market research to make sure the idea is viable in your area as well.

If you’re still struggling for ideas, you can check out our list of easy to start side hustles.

What business can’t I run from home?

There are a lot of businesses that you can run from home, but you’ll largely by constrained by your space more than anything else.

You’ll need to check any regulatory constraints that apply to the specific business type you’re hoping to start but as a general rule of thumb, anything that causes excessive noise levels or generates hazardous waste likely wouldn’t be appropriate to run in a residential property.

Do I need permission to run a business from home?

Whether you’re renting or you own your home, the likelihood is you’ll need permission from someone to start a business in your home.

Your mortgage provider (if you own)
they may need you to switch partly or wholly to a commercial mortgage rather than a residential one. If you run a business in a residential property without their permission you may be in breach of the terms of your loan.

Your university or student housing provider (if you’re in uni halls)
some universities forbid starting a business from their halls, so you’ll need to check the rules for your specific university.

Your landlord (if you rent)
typically landlords can’t refused without good reason. We’ll explore what those reasons are later on!

Your local council
this isn’t always needed but could be if you’ll have a lot of customers at your home or need a licence to run your business.

And while you don’t need permission from them, you’ll also want to contact your insurance provider to make sure your business is protected as your home insurance won’t cover your business even if it’s run from an insured home.

A final point is that you may need to get specific health and safety certificates depending on the nature of your business and could face fines if you need but do not have them.

How does running a business from home affect my tax?

If you start a business from home, this can have some tax implications. It’s important to consider how this may change your tax responsibilities before getting started:

Council tax and business rates

While council tax is only paid on residential properties while business rates are paid by business properties. For a small business run from one room in your home, you’ll likely still be okay to pay your regular council tax, but if you have converted a large portion of your home to business use, then you may be liable for both business rates and council tax.

If you are subject to business rates, it may be worthwhile to look into small business rate relief. You can find out more about when you may be expected to pay business rates by visiting the UK Government website.

Allowable expenses

Allowable expenses are essential costs that keep your business running properly. They’re tax deductible, which means you don’t pay tax on the money you’ve spent for business expenses. If you’re working from home, it’s likely many of your expenses are split between business and personal use, such as electricity or heating. You’ll need to evidence what proportion of those bills is for business use and will only be able to claim allowable expenses on that portion. Alternatively, if you work at least 25 hours per month you can use simplified flat rates:

Hours worked at home per month Flat rate per month
25 to 50 £10
51 to 100 £18
101 and more £26

The flat rate does not include telephone or internet expenses. You can claim the business proportion of these bills by working out the actual costs.

If you’re unsure whether to calculate actual costs or use the simplified expenses, the UK Government has a useful tool which can help you decide.

Working from home safely

If your home business is largely based at a computer, or you’re hyper-focused on crafting something intricate, it can strain your eyes after a while. It’s important to regularly give your eyes a break from what you’re so intently focused on:

Take short breaks on a regular basis rather than long breaks infrequently.

Use the 20-20-20 rule: rest your eyes for at least 20 seconds every 20 minutes by looking at something 20 feet (6 metres) away.

Blink more frequently to keep your eyes from drying out. When you’re really focused on something you tend to blink less, so try to be conscious about how often you are blinking.

Posture is also important – if you’re hunched over a table while crafting or a laptop while doing admin, it can lead to muscle soreness or stiffness. If you’re working on a computer, here’s a few steps for setting up your workspace for success:

  • The top of your screen should be level with your eyes and about an arm’s length away.
  • Ensure that the back of the seat provides good lower back support. You can use a cushion to provide additional back support if needed.
  • The keyboard should be just below elbow height.
  • The computer and screen should be directly in front of you on the desk, and the keyboard should be central - don’t twist your back to use or view equipment.

When choosing a workspace, you may want to also consider a space with good natural light and ample storage for any tools or equipment you want to have close by. If you can’t get much natural light, you may want to consider a daylight lamp to help emulate natural night!

The last consideration on safely running a business from your home is whether nor not you want clients or customers to know your home address. If you’re not having customer at your home, you could set up a parcel forwarding service so that any returns or business mail don’t requite giving your residential address to business contacts.

Frequently asked questions

If you’ve still got a few questions about starting a business from your own home, see if it’s answered in our FAQs below:

Any business that doesn’t require a lot of storage or space tends to work well. Consider any web-based services (graphic design, photo editing, copywriting, etc), online retailing, on-call services (joinery, plastering, etc) or other businesses that don’t require a lot of office or operating space.

If you live in a council house, you may need permission from your local council or housing association, so it is worth checking with them first. It is possible that they’ll refuse if they feel there could be disturbance to the neighbours, damage to the property or if it will change the main use of the property from residential to commercial.

You’ll need to get your landlord’s written permission first and it may require an update to your tenancy agreement. When you reach out to your landlord to ask about running your business from the rented space, you may want to include details such as:

  • What the business will be
  • How much of the rented space will be dedicated to running your business
  • Details of your business insurance
  • Whether or not customers will be visiting the property and parking arrangements for customers
  • How often, if ever, large deliveries will be made to the property

As above, they might refuse if the business may result in disturbance to the neighbours, damage to the property or if it will change the main use of the property from residential to commercial and therefore affect the type of mortgage they need.

If your landlord has previously included things like heating, internet or electricity in your rental price, they may choose to up your rent or no longer include these if starting a business from home leads to significantly increased costs.

The landlord may also wish to inspect the property more frequently to ensure the business isn’t negatively affecting the flat.

The final consideration is that the landlord’s insurance policies or your own residential insurance policies are unlikely cover the business. So, if you’re interacting with the public as a business in any way, you should have your own public liability insurance.

Some universities specifically prohibit businesses being run from their halls, so you’ll need to check with your residential services if you’d be allowed to do this. For international students who are in the UK on a student visa, it’s important to remember that your visa does not allow you to start a business while here to study.

How to start a business from home

If you’re ready to start your business from home, check a few of the other useful guides which can help you start off on the right foot:

Guide to starting
a business

Guide to writing a
business plan

Guide to writing a
marketing plan

Work hard, insure easy

Running a business is hard work. That’s why we’re doing all we can to make your insurance a bit easier. From helping you tailor your policy to your unique business needs, to taking the guesswork out of finding business insurance, find out what we’re doing to help small businesses.

All links are checked and valid at time of publishing, 19 December 2023.