Home Business Are You Running Your Business From Home? Here Are 5 Things You Must Know.

Are You Running Your Business From Home? Here Are 5 Things You Must Know.

by Finance Spot

The internet and digital technology have transformed the way businesses can operate. Working from home used to be an uncommon practice, embraced by only the more progressive companies. However, the pandemic has forced many companies to adopt remote working as a necessity rather than a perk. 

There are many benefits of remote working for businesses, such as increased staff wellbeing, reduced office space, and lower environmental impact. However, for some businesses, operating from home is how they started their business, and perhaps they continue to run it from home indefinitely. 

Running your business from home has many benefits. For starters, you don’t need to find business premises. You may also enjoy a better work/life balance. However, there are a few things that you need to consider if you operate your business from home and a few more rules to which you’ll have to adhere. 

1. Seek Permission 

You should know who you’ll need to seek permission from if you will run your business from home. If you are living in rented accommodation, you should check your tenancy agreement for any restrictions. If it is not mentioned, then you’ll need to check with your landlord whether you can run a business from the property. If you are a homeowner with a mortgage, you should get permission from your mortgage company to run a business from home. 

2. Planning Permission 

If your home is likely to need any structural adjustments that could cause any disruption to your neighbours, or even be noticeable, you will likely need planning permission. If you are operating on your own, just through a computer, you will probably not. Here are a few examples of when you will need planning permission:

  • Significant changes to your home’s look or structure.
  • Increase in the number of people, such as customers or suppliers, coming to your property.
  • Any signage erected outside the property.
  • Storage of stock and other business-related items.
  • Conducting activities not expected in a residential area. 

    If you are in any doubt about whether you require planning permission, you should contact your local authority’s planning office. 
photo of lady running business from home

3. Rates and Tax Implications 

If you use part of your home exclusively for running your business, you will be liable for paying business rates on that part of your home. For instance, if your home’s bottom floor were used as a shop, you would need to pay rates for the whole floor.

If you were to sell your home, having run a business from it, you might be liable for Capital Gains Tax on the element used for business purposes. The reason is that the proportion of your home used for business would not have Private Residence Relief applied to it for paying Capital Gains Tax. Therefore, if you used half your house for business purposes, you would pay Capital Gains Tax on that half of your home. 

Remember, this rule only applies to areas used solely for business purposes. If you are running your business from a computer in, for instance, the living room, you remain exempt from Capital Gains Tax. That’s because the living room, bedroom, home office, etc., is not exclusively for your business’ use.

4. Self-Assessment Tax Returns

If you are in a partnership or operate as a sole trader and work from home for more than twenty-five hours per month, you can use simplified expenses. This clause allows you to claim a flat rate for some of your business expenses instead of precisely calculating what proportion you’ve used for business purposes. Doing this will enable you to claim back an element of your household costs such as council tax, broadband, heating, and so on.

5. Insurance 

If you have regular home and contents insurance, it’s unlikely to cover your business activities, particularly if you have large quantities of stock or specialist tools on the property. You need to have adequate insurance to protect your business, which is likely to be more expensive. 

If you have customers or suppliers visiting your property, they will not be covered for any incident that may occur. You will need public liability insurance to cover these visitors. If you have employees, you must have employer’s liability insurance if they are working on your property. 

Conclusion 

Operating your business from home can be a great way to get started and grow your business without too many overheads. It can also be an excellent way to achieve a better work/life balance. Just ensure you are aware of these five things you must know if you’re considering running your business from home.

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