Everyone’s heard the stories of billionaires starting their businesses from a bedroom at home but setting up a start up takes careful planning and there are hidden costs. Here's what you need to know to make it work.
Lockdown saw millions of us swapping city-centre offices for kitchen tables, spare rooms or anywhere a laptop could be set up, but when it comes to starting your own business, can it also be done from home?
Many people dream of one day being their own boss, spending their time working for themselves on a passion or skill they've always had but making this dream a reality takes a lot of hard work, organisation, and admin.
Sadly, whatever business you have, from cake making to personal training, there’s the paperwork to consider.
You may need a council licence to sell your goods, for example, your mortgage provider or landlord will have to be informed, and you’ll need insurance to cover you and your equipment and supplies.
There’s also the day-to-day planning of splitting a new business between a current job and other responsibilities such as childcare.
But it can be done, millions do it every year, in fact there are around 4.4million freelancer in the UK and they contribute £162billion to the economy every year, according to research from IPSE.
Here we look at how to turn your dream of owning your own business and working from home into a reality and everything you need to be aware of along the way.
You’ve got an idea, you’ve secured money to start and now the only thing left is to get going on your very own business.
But before you begin selling and building your global empire, there are a few things you’ll need to organise to make sure you can run it legally and both you, your goods, and customers are protected.
When you start a new business, a crucial area to consider is the cost, both day-to-day running and also how much you predict to make in a year in profit, after you’ve paid for everything from the delivery drivers to your energy bills.
Using a spare room, garage, or even kitchen table is one way to cut costs, but it won’t be for everyone and it won’t suit every type of business.
So, before you decide, it’s important to weigh up the pros and cons of running a business from home to see if it’s the right choice for you and your business.
There are some major benefits of setting up a business from home including the following:
It’s cheaper to work from home - You’re not paying to rent an external space such as an office or kitchen so your costs will be lower
You can work alongside other responsibilities - If you’re starting your business alongside another job, or at the same time as caring responsibilities, such as looking after children, it can be easier to be at home rather than having to travel to a different location to get the work done for your business.
There’s less to pay for business costs - You don’t need to think about paying for rent, heating, lighting, insurance or tax on another premises if you’re running your business from home.
Take advantage of tax breaks - There are several tax breaks you can get if you run a business from home. These allowable expenses include council tax, heating, lighting, broadband and phone calls. You can claim the tax back through your self-assessment tax return and more details can be found at GOV. uk.
There are many advantages of setting up a business from home but setbacks also including the following:
You need space - Not all business can be done from home, so it depends on the nature of your business. If it’s making gift cards or photography, you won’t need as much space as a plumbing or DIY business, for example. The type of business, and size, will also determine how much space you need. Can you do it all from a desk with laptop, for example, or do you need room to store your equipment or supplies.
It’s hard to balance work with other responsibilities - On one hand being at home makes it easy to carry out other jobs, on the other it means there’s no real separation between your business and your home life. Leaving to go to another premises means the time away is spent just on your business, while if you’re at home you may have to juggle the business with other work or childcare duties, for example.
You’ll still need to pay extra for insurance - Just because you’re working from home, doesn’t mean you don’t need insurance. While not legally required, you probably will want to buy it to protect yourself, your supplies and any staff you employ.
Mortgage providers and landlords need to know - There’s still a fair amount of admin involved even if you’re still at home, such as telling your mortgage provider and landlord about the business.
Every business is unique and therefore may require extra checks or paperwork before you’re allowed to start operating but the following checklist looks at the general areas to consider.
You may need to tell your local council about your business, especially if it will affect your home. If you’re going to have lots of customers arriving or deliveries, for example, or you want to advertise the business on your home, it needs to know. You may also need a council licence to operate. This will depend on the type of business, but most food-based companies will need one from their local authority's environmental health team.
You will need to register your business with HMRC and pay tax on anything you make, over £1,000 a year. There are different ways to register, as a sole trader, a limited company or as a partnership, and you can find out more and how to register on GOV.uk. Any business that makes £85,000 or more per year also needs to be registered for, and pay, VAT.
This isn’t mandatory but it can be a lot easier when it comes to filing your accounts if all the money you make from your business is in a separate account. There’s a wide range of business accounts to choose from too, some are free and some you’ll need to pay for.
Business insurance isn’t a legal requirement, but you may want to protect your income in case you can’t work, your supplies, in case they’re damaged or stolen, and your staff if you employ any. Most business insurance policies also cover public liability and legal fees in case any customers are harmed and take legal action. It’s also worth contacting your home insurer before starting your business, as they may need to change your policy to make sure you’re fully covered.
Your business insurance may state that you need to carry out certain health and safety checks and training before operating. This is often the case if you’re selling food or drinks products. Your local environmental health office can offer more advice on this, and give you information on what extra checks you may have to do.
You may need to let your mortgage provider know about your business. This is usually the case if the business will affect neighbours (such as through noise or deliveries) or if you are planning on expanding your home in order to carry out the business.
Council tax is only paid on residential properties but business rates apply for business properties. If a significant amount of your home is used for your business, it may be classed as a business property, and you'll need to pay both business rates and council tax on it.
If you’re planning on making any changes to your home to allow you to run your business from it, you may need planning permission from your local council. This could be; an extension, converting a garage or shed into a kitchen, or using part of it for sales.
Both property owners, and tenants, need to tell their mortgage provider, landlord or estate agent about starting a business from home.
A landlord cannot unreasonably withhold or delay allowing you to run your business from home but they might refuse if it turns the renal agreement into a commercial one instead of residential. They can also refuse if it’s going to cause problems for neighbours or to the property.
Choosing to use your home, or rent out a private space, will be entirely down to the nature of your business, the size of it, and how you work on a day-to-day basis.
If it’s a relatively small-scale operation, you’re just starting out, and it’s something that can easily be done from home without many changes, it makes sense to start from home.
But if you find your home isn’t big enough, you’re not able to get the work done properly, and you don’t have the room to operate or store your equipment or supplies, it may be time to look into renting a separate space.