Running a business from home in the UK
Wondering about the pros and cons of running a home-based business? Read our handy guide with tips for setting up your home office.
You don’t necessarily need to rent office space to run your own business – plenty of people start a business from home.
Running a home-based business can be cost-efficient and convenient, and can work for a whole range of different business types including:
Web-based services
Home-based services (e.g. therapy, personal training, tutoring)
Online retail
Small-scale manufacturing
On-call services (e.g. plumber, electrician, mechanic)
Entertainment
The list goes on. So long as you don’t need a lot of office space, storage or work space, any number of businesses could be suitable for home operations.
However, there are other practical and logistical factors to consider too.
Here’s how to go about running a business from home.
Is it legal to run a business from home?
Running a business from home is perfectly legal in the UK for most business types.
You just need to ensure you have the necessary permissions for the type of work you are doing, that it isn't causing a nuisance for your neighbours and, most importantly, you are paying any necessary business rates.
Many businesses, particularly those that are small and web-based, will not require special permissions or cause any social issues and may not require you to pay business rates.
Some businesses may not be appropriate to run from a residential property, such as those that generate waste materials that may be hazardous to health or cause excessive noise.
Where should I start with a home-based business?
Before setting up a home-based business, the first step is assessing whether your type of business is suited to home working.
If you’re a services business which delivers in person (such as a beautician, therapist or childminder), think about the space and equipment you need to work, along with any regulations with which your workspace must comply.
Even if you deliver online services, consider if your home is properly set up for them. For instance, poor broadband in your area might limit your ability to transfer large files quickly.
Manufacturing businesses, such as handicrafts, pose a more daunting challenge.
You’ll have to consider a number of questions, such as:
Do I have the space I need?
Will the work interfere with my living areas (and vice versa?)
What equipment do I need?
Is it safe for others who share my living space?
Will the business have room to grow?
What if I need to take on additional staff?
Similar questions apply if you’ll be handling physical products of any sort.
If you’re supplier, for instance, consider how much storage space you’d need at any given time, and how this might affect your logistics (i.e. the flow of products in and out of your premises).
In summary, consider all the practical aspects of your particular business before choosing to set up at home.
What should I consider when running a business from home?
Work environment
Firstly, you need a good work environment.
Your workspace will determine how productive you are in the day-to-day running of your business.
Create a space that is functional, fully-equipped and comfortable. Have a dedicated office if possible – you don’t want home life and work interfering with each other.
But do bear in mind that if your working area is a specific part of your home, you may need to pay business rates.
IT equipment
Your IT equipment must be up to the demands of a business, so invest in the appropriate equipment, such as computers and printers.
It is worth subscribing to a cloud-based file-hosting service to ensure you have enough secure storage.
Never trust important files only to your physical hard drive – always work primarily from a server that is backed up, and preferably keep your own backups too somewhere else.
Practical needs
Check your home has enough physical space for the stock, equipment and activities required.
If you require a vehicle for your work, is your current transport suitable in terms of size and running costs? If you’ll be dispatching many products by post, are you conveniently close to a delivery service?
Think through every activity you’ll need to undertake in a typical working month, and ask what you need to make it all run smoothly.
Neighbours
Some businesses can be disruptive to some extent, such as through noise, mess, unsightly workshops in gardens, parking issues, or clients coming and going.
Give serious consideration to how much disturbance your business might cause and how your neighbours might be affected.
What are the main advantages of running a business from home?
Running your business from home can deliver a number of benefits, such as:
Saving the cost of running a separate office
Saving on travel costs and other daily expenses
Being able to juggle work and domestic commitments
You are in complete control of your working environment
Something as simple as being able to take a nap at lunchtime, be around to pick up the kids from school, or take the dog for a walk, can be reason enough to enjoy working at home.
Are there any drawbacks of running a home-based business?
There are of course potential downsides to making your home into your workplace.
These might be:
Being unable to escape from work, even at weekends.
Using up part of your living space.
Domestic distractions that interfere with your work.
Location as your home may not be ideally placed for the business you’re running.
Scalability as your business may need to expand more than your home can cope with.
Loneliness or cabin fever if you don’t get out of your home enough.
Do I need permission for my home-based business?
Depending on your type of business, you may need to seek local authority permission to run it from your home.
You should also consult your mortgage provider to see if you need to switch partly or wholly to a commercial mortgage.
If your property is rented or part of a shared block, then you should seek permission from the landlord.
And if you think your business might be a disturbance to neighbours then get in touch with your local council.
Remember too that your home-based business must still comply with health and safety laws.
However, if you have fewer than five employees you don’t have to document your risk assessment or draw up a health and safety policy.
Here's a quick summary of the pros and cons of running a business from home in the UK:
| Pros | Cons |
|---|---|
| Ability to handle domestic commitments and childcare issues alongside work | Domestic commitments could be a distraction |
| Lower cost than renting an office | Danger of being ‘on top of the shop’ and feeling isolated, depending on your type of business |
| Saving on travel costs and other expenses | It’s a possibility that your business could disturb your neighbours |
| The ability to work at more convenient times of the day, depending on your type of business and control your environment | You still need to comply with health and safety law and you may need to pay business rates |
Do I need a licence for my home-based business?
No special licence is required when you run a business from home.
Some businesses require licences anyway, whether you run them from home or from special work premises.
Businesses that require licences include:
Loans and financial services
Import/export
HGV services
Taxi driver
Private coach operator
Gambling
Childcare
Pet shop
Dog breeding
Security guard
Sports coach
Ear piercing
Do I pay more council tax if I run a business from home?
Council tax is paid on residential properties, not business properties.
If a significant portion of your home is used for your business, then the building may be partly classed as a business property, and so be liable for business rates in addition to council tax (see below).
Do I have to pay business rates?
Whether a home-based business must pay business rates depends on how much of the property is used exclusively for business purposes.
How to estimate your business rates
Find the rateable value of your business property.
Check which multiplier to use below.
Multiply your rateable value by your multiplier. This shows you how much you will have to pay in business rates for the year (before any relief is deducted).
Take away any business rates relief you’re entitled to. If your business rates are increasing as a result of a revaluation, this may include transitional relief so that changes to your bill are phased in gradually.
What about business insurance?
You are likely to need new types of insurance if you're running a business from home.
The exact types you need will depend on the type of business, the risks involved and your own personal risk tolerance. Find out more about insurance for businesses.
Get expert financial advice
Running a business from home comes with its own set of financial and legal considerations, from understanding your tax position to making sure you have the right insurance in place.
Unbiased can quickly match you with a qualified financial adviser or accountant who can help you with your financial planning and growth plans.
)