How to run a business from home

How to run a business from home

Running a business from home is a great way to keep costs low when you’re starting out. We’ll take you through what you need to know to make your home business a success.

In this guide:

Make sure you’re registered

When you start a business you need to make sure you’re registered with HMRC. The most common ways to start a business are to register as a sole trader, limited company or partnership.

Read more about how to start a business

Running a side business

If you’re planning to run a side business alongside a PAYE job there are a few things you need to consider. Make sure you check your current job contract first, and register with HMRC to pay your income tax.

Read more about how to run a side business

Don’t forget about tax!

When you work for yourself, you’ll need to submit a Self Assessment tax return each year and pay National Insurance contributions. There may also be other kinds of tax that affect your business, like VAT or corporation tax.

Read more about which taxes could affect your business

Prepare your space

Before you start working from home, you need to make sure that your workspace is ready.

Get the right permissions

Depending on how you’ll use your workspace, there are different permissions you may need to get. First, check with your mortgage provider or landlord. If you plan on changing your property for your business, you need to check with the local planning office. You might also need to speak to your local council if you’ll have lots of customers or deliveries, want to advertise outside your home or will need a business license.

Business insurance

Your home insurance may not cover your business, so you may need seperate insurance for this. Check with your home insurance provider, and if you do need business insurance make sure to factor this in to your expenses.

Health and safety

When you run a business from home you still need to follow health and safety guidelines! You will be responsible for carrying out a health and safety risk assessment and following health and safety rules. If you don’t, you can face legal action.

Choose your workspace

Where you choose to work in your home will depend on a few things.

If you’re working at a computer try and find a room where you won’t be disturbed. Make sure you have enough space for your equipment, and a quiet place to take calls if you need to.

Your business type might have more specific requirements, for example making or packaging goods, running a shop or offering a service from your home. In this case, you may need to make changes to your property to ensure you have the right space for your business. In this case, make sure you get the right permissions!

The right equipment

Make sure you have the right equipment so your home business can run smoothly! You may already have some items you can use for your business, or you might need to buy specific things.

When you buy equipment for your business you can often write if off as an allowable expense for your tax return. But, there are some kinds of equipment that are considered business ‘assets’ which need to be recorded in your accounting records.

Find out more about recording assets in your accounting

Know what expenses you can claim

When you run a business from home, you can claim a reasonable proportion of your costs as expenses on your tax return. This is based on how much you use the expense for your business.

If you’re working from home, expenses that are likely to be split include:

  • Telephone and internet
  • Electricity and heating bills
  • Mortgage or rent
  • You can only claim for water if it is used significantly for the purpose of your business

To work out which proportion of your expense you can claim, there are different methods. For example, you could see what proportion of your home is used for business, and what proportion of time it is used for business to work out your claim.

Find out what expenses you can claim here

Find out if you need to pay business rates

Business rates are paid if you use a non-domestic property to run your business.

When you run your business from home, you don’t normally have to pay business rates. This normally applies if you have a home office or sell goods by post. But, there are some circumstances where you would need to pay business rates:

  • Your employees work at your property
  • Your property is ‘part business, part domestic’, like living above your shop or selling goods or services to people who visit your property
  • Your home has been modified for your business needs

To find out if you need to pay business rates you can contact the Valuation Office Agency. If you live in Scotland contact your local assessor.

Read more about business rates

Manage your finances with accounting software

Keeping a close eye on your finances is really important. Using an accounting software like Bokio is a great way to see how your business is performing so you can budget for the future.

With Bokio accounting software, you can do your bookkeeping, invoicing, and manage your finances all in the same place. We have everything you need to help you prepare for your Self Assessment tax return, submit your VAT Return for Making Tax Digital and keep the right financial records. If you need an extra hand, we can help you find an accountant to work with.

Accounting is kept simple with Bokio, so you have more time to spend running your business.