Starting a business from home? You can get set up pretty quickly, but it’s worth doing some planning.
From the idea itself to building a list of businesses to run from home, plus specific taxes and considering neighbours, proper planning can help you build a successful home business.
Read our guide to businesses you can run from home, and don’t forget to sort out your specific home business insurance, too.
If you want more general information, read our guide on how to start a business in the UK.
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Starting a business from home – what can I do?
Whether it’s selling goods or providing a service, you can run many different businesses from home. Home business opportunities and popular trends include:
What does running a business from home mean?
A home-based business is when the main office address for your business is also your home. Whether you’re running an online shop or providing a service where you go out and meet clients, if the business is registered to your home address then it’s a home business.
There’ll be different legal requirements and tax responsibilities depending on your business.
For example, if you expect to have lots of customers and deliveries to your home it’s likely you’ll have to follow more regulations than if you’re simply working from a laptop in your living room.
The government says:
you may need permission from your landlord or mortgage provider and local council
your council tax bill might change
you may need to seek planning permission if you’re making major changes to your home (for example turning part of it into a studio)
check you have the necessary health and safety certificates
How to start a small business at home
From online business ideas to practising as a therapist in your own home – you know you want to set up a home business, but are you settled on your product or service? And what’s the easiest home business to start?
What business should I start?
Lots of people end up diversifying and offering a couple of different things, but when you’re starting a small business, it’s best to keep your plans simple.
Whether you want to turn your current job into a freelance service – from accountancy to childminding – or set up in a completely different line of work, there are hundreds of home business ideas with low start-up costs.
The question is, what are you good at, and can it generate an income? If the answer’s yes, you have the beginnings of a home business plan. See how to develop it below.
A chance to win £25,000 for your business
Few have been hit harder by Covid-19 than small business owners.
That’s why we’re giving away £25,000 to one entrepreneur as part of our #BusinessBoost campaign – to help start, grow, or revive their small business.
Entries close 17 September 2021. Terms and conditions apply.
Starting your own business from home
1. Set out your working from home idea(s)
Knowing your product inside-out will give you a solid foundation when you start a business from home. Maybe you’re planning to set up as an acupuncturist, or you’re turning your tech expertise into a website consultancy.
Whatever your products and services, your business idea will need thorough market research to succeed. A great place to start is with your local competition, or similar business set-ups.
Research – ask friends and look at competitors
On the one hand, you’re going to be competing for local business and customers. On the other, you can learn a lot from successful home business set-ups, and there’s often potential for collaborations and joint-projects – and maybe even referrals.
Spend some time researching your target customers – are they local, or mostly online? Where are they likely to see your advertising? What sort of prices will work for them?
Once you’re clued up, build a list of the businesses currently serving their needs and get a feel for what they’re doing right.
Can you approach a couple of owners and tap into their experience? They may have a long waiting list for their services, and be happy to pass on advice and referrals.
For example, you might be setting up a business from home as a violin teacher, and live nearby to someone teaching flute. Their advice could be invaluable, with lots of potential for exchanging referrals.
2. Put together a home business plan
Every business evolves as it grows, but nailing down a plan of your own home business ideas, target customers, competitors and financial projections is a must, before you commit time and money.
Having a business plan keeps you focused, and helps you plot a few milestones.
It’s also handy if you’re looking to get funding down the line.
Your plan should include everything from your home business set-up and insurance details to marketing plans, growth forecasts, and any qualifications you need to work towards.
When it comes to operations, think about which room you’ll be based in. If customers will be visiting, how will you separate home and work life? Will people be waiting in your living room? If you’ll be making products to sell, will you need a separate, dedicated space?
And lastly, make sure you know how much money you have to put into your business, and how to make it viable. This might be simpler if you’re planning to hold on to your regular job (with its dependable salary) alongside your own home business plans for a side hustle, but less certain if you’re handing in your notice and setting up as a sole trader.
3. Make your home business-ready
This all depends on what sort of business you’re setting up in your home. Most won’t require big structural changes, but you might need to factor in planning permission, or at least think about notifying your neighbours.
Here are the key things to factor in when setting up a small business from home:
If your home is going to remain pretty-much as it is now, with your business ‘quietly accommodated within it’, government guidance states planning permission shouldn’t be needed.
Planning permission requirements kick in when your home is no longer used mainly as a private residence, or you have a marked rise in traffic, with customers coming in and out.
You’ll need to investigate planning permission if you’re located in a residential area and any of your activities may cause disturbance – from noise and car parking practicalities to things like cooking smells and rubbish disposal.
Not sure which category your home business falls into? Gov.uk can point you in the right direction.
It shouldn’t mean any change in your mortgage repayments, but the government says you should let your mortgage provider know if your home is going to accommodate a business.
Home contents insurance
Whether it’s a whole new policy or just a tweak to your existing home insurance, it’s a good idea to get clear on your responsibilities and options. For example, your contents insurance might not cover stock. We go into more detail about insurance for home businesses below.
Health and safety at home
If it’s just you working from a laptop, this won’t be so important. But if you’re expecting customers to visit you at home, or you’re going to be preparing food, for example, health and safety checks will be needed.
For the basics, take a look at the Health & Safety Executive’s website.
Establishing a business address
If you operate in the business-to-business space, potential clients may be wary of dealing with a service provider who doesn’t have a professional business address.
Equally, if you’re a tenant in your current home, you may not be in a position to register your business at that address.
In either case, you might want to consider signing up for a virtual office space.
Even if you’re free to register your business at your home, using a virtual office address can save you the hassle of having to update your details with the bank, HMRC, and on your marketing materials every time you move.
Consider your neighbours
They could be the key to your success or failure, so keep your neighbours on side. Let everybody know well in advance what you’re doing, especially if you’ll be getting lots of visitors or deliveries.
What might seem inconsequential to you could be a big deal for one or two of your neighbours, from the sound of trumpet practice to a van obscuring their view. Explain up-front that you’ll try to keep disturbance to a minimum, and keep that promise.
If you do expect an increase in noise or any other disruption, let your neighbours know. Listen to their concerns, do your best to address them.
4. Think about home business insurance
Insurance for a home business will be a must, depending on what sort of set-up you have. The main covers you’ll need to think about are:
Public liability insurance
Many home business insurance policies will include this as standard. Public liability insurance is important if customers will be visiting you at home – it protects you if someone is injured or their property is damaged because of your business.
Quick example: you’re running your hairdressing business from home, and have just cleaned the floor before a client arrives. The client slips on the wet floor and injures their hip. Public liability could cover the resulting legal fees and compensation costs, up to the policy limit.
Product liability insurance
This one protects you against claims for personal injury or property damage caused by products and goods you’ve designed, sold, or supplied. A specialist home business insurance policy will give you the option to include it, and remember, you may still be liable for a claim, even if you didn’t make the product.
Quick example: you’re making and selling children’s toys at home, and a faulty one causes an injury. Product liability insurance could cover a resulting claim.
Professional indemnity insurance
From accountants and IT consultants to copywriters and designers, professional indemnity insurance is relevant to home businesses that offer services and knowledge, and process information. It protects you if a claim is made against you for negligence or error.
Quick example: your home-based accountancy business receives a new data file from a client. When sending on the data, you accidentally copy the wrong person into an email and your client sues you for breach of confidentiality. Professional indemnity insurance could pay the compensation costs, as well as your legal expenses.
Employers’ liability insurance
If you employ anybody as part of your home business, employers’ liability insurance is almost always a legal requirement.
Quick example: you take on your first employee to work for your home-based carpentry business. While using specialist machinery, they’re injured and make a claim against you. Employers’ liability insurance could cover the claim, along with the legal costs involved.
These are some of the basics, but you’d probably also want to look into business interruption insurance, stock insurance, contents insurance, vehicle insurance, and check your existing buildings insurance, to make sure you’re covered.
5. Registering your home business
Every new UK business needs to contact and register with HMRC. If you’re setting up as a limited company, you’ll also need to inform Companies House (on the other hand, if you’re just planning to work as a self-employed sole trader, you can skip informing Companies House and the additional admin that comes with it).
Not sure which business structure is right for you? Read our guide to the differences between sole traders and limited companies to get the ball rolling.
VAT for home businesses
Businesses turning over £85,000 or more, or who are close to this threshold, must be registered for VAT. You can put this in motion voluntarily any time – our guide to VAT is a good place to start if you’re thinking about VAT registration, or aren’t sure what applies to you.
Home business rates
If you’re running your home business from your kitchen table or a desk in the corner, you probably won’t be subject to business rates. But if you’re working in a room that’s used exclusively for non-domestic activities, for example a workshop or therapy practice room, business rates charges may start to apply. Check gov.uk’s business rates guidance to see what applies to you.
IP for home businesses
From trademarks and patents, to copyright and design protection, depending on your business you’ll want to make sure your intellectual property and unique name, brand and inventions are protected. Read our intellectual property law for small businesses guide for more.
Not sure how to start a business from home or if it’s for you? Our guide on how to start a business gives a more general introduction to starting up a business for new entrepreneurs.
Have you started your own home business? Let us know in the comments.