Many of us would relish the chance to put our skills and ideas to work in our very own business, not to mention the opportunity to ditch our daily commute. So then, what’s stopping us from taking the next logical step and going it alone by starting your business from home?
According to the FSB, there has been a 6.5% drop in the total number of SMEs in the UK in 2021. This is likely due to the impact of the Coronavirus pandemic, even though there was support for businesses such as grants and the furlough scheme, some, unfortunately, couldn’t survive.
Despite this, numerous companies have had to adapt to the situation and allow people to work from home. This forced change has now adapted into many different working situations, such as hybrid and fully remote, which (if you’re one of these people), can spare you crucial hours that you can spend on conceiving, developing and starting your business from home.
Even if you’re not someone who has a hybrid or fully remote work situation, whatever your occupation, there’s no doubt that tech is a big driver to starting your business from home. The fact that we’re better connected than ever means that it’s what we can do partly due to advancements in technologies as well as having to adapt, rather than where we’re doing it, that’s important.
So can it be the case that all you need to succeed as a home-based entrepreneur is your toolkit, smartphone and laptop? Well, not quite. But it’s certainly doable. This guide aims to point you in the right direction for getting your business on the go.
Is working from home the right thing for me and my business?
As always, start with your objectives and business plan before considering whether a home-based business is the best way of achieving them. With this in mind here are two concerns common to many entrepreneurs at this stage:
“I want to do things my way…”
Especially if you have multiple commitments to juggle the idea of starting up from home may seem ideal. Remember that the challenge of balancing family and career doesn’t automatically disappear if you’re home-based. Yes, it’s easier in practical terms to jump from one to the other, but you’ll almost certainly want to keep at least some element of routine, to separate work from play. What working from home can offer is scope for flexibility in this routine.
“I want to get up and running, but funds are tight…”
The truth is you’d love a fully serviced office in a prime location, but it just isn’t an option yet. Commercial property doesn’t come cheap and neither do the overheads associated with it. Working from home can allow you to get up and running quickly and easily, without commercial rent eating into your start-up funds and revenue.
You may still need to invest in new equipment though, and then there are the costs associated with operating from home (phone bills, heating, electricity etc.). From day one get into the habit of good bookkeeping by keeping all receipts, it will make things easier when it comes to completing your Self Assessment tax return or company accounts if you decide to trade as a company.
For sole traders who are home workers, the HMRC’s system of simplified expenses helps to make things much easier. If you decide to become a limited company, you could be eligible to claim up to £6 a week through working from home tax relief.
Structuring a home-based business: how do I give the right impression?
It’s very common to start as a sole trader and for this, you’ll need to register as self-employed. This is quick, easy and you can do it online.
Depending on your clientele you may be concerned that giving a residential address as your business address could look slightly ‘amateurish’. And then there’s the privacy issue, do you want to publicise your home location to all and sundry? Here are a couple of ways to help deal with this:
- Operating as a limited company. Going about it in the right way and setting up a limited company ought to be a quick, straightforward and inexpensive process. Having that ‘Ltd’ assignation after your name helps to convey the fact that you mean business, even though you’re working from home, not to mention it could be more tax-efficient for you to structure your business as a limited company!
- Consider a registered office address service. When you start a limited company you specify a registered office address to which all official correspondence from Companies House and HMRC is sent. Our Registered Agent Address Service enables you to use our address instead of your own home. We then forward all correspondence to you. In this way, your home address is kept off publically visible official documents. Given that we are based in the City of London with a reputable business postcode, this can also help to give your business a reassuringly professional, corporate and well-established feel.
If you’re not sure if you’re business should be a sole trader or a limited company, check out our Limited Company Vs Sole Trader: Advantages and Disadvantages article.
Adapting your home: do you need permission?
Setting up a PC and phone in your spare room is one thing, converting a garage into a workshop could be another…
The UK Government’s Planning Portal provides essential reading for anyone who intends to operate a business from home. It recommends that you ask yourself four questions before you start:
- Will your home no longer be used mainly as a private residence?
- Will your business activities result in a marked increase in traffic and/or people calling (think in terms of delivery vans for instance)?
- Will your business involve any activities unusual in a residential area?
- Will your business disturb your neighbours at unreasonable hours or create other forms of nuisance, such as noise or smells?
Normally you wouldn’t have to pay business rates starting a business from home, however, If there is an area that is solely used for non-domestic purposes, business rates may start to apply, you can find out more on current business rates on the government’s website here.
You need to avoid the situation where you get a home-based business up and running only to find you’re in breach of the rules. If in doubt consider contacting your local authority to get a Certificate of Lawful Use. You should also check before you make any physical changes to your property to ensure compliance with any building regulations.
Bringing in ‘outsiders’: employees and customers
Home workers can take on employees. For this, you’ll need to register as an employer. As with all employers, you’ll also have to keep payroll records and will probably need to operate PAYE. Employers’ Liability Insurance is another legal requirement and, regardless of where those employees will be working, you are still under a duty to provide your employee(s) with a safe working environment.
Get in touch with an insurance broker before you take on staff for essential guidance on any adjustments that might be needed to make your home safe for staff. We’ve teamed up with Superscript, so if you decide to start a limited company with us, we’ll make sure that you get the best insurance quote that will give you the best price and the cover you need.
Safety on your property
If you invite customers to your home, e.g. for music lessons or physio sessions, you are under a common law duty to take reasonable steps to ensure their safety on the property. There’s no legal requirement to take out insurance for this, but it’s extremely advisable. For one thing, it offers peace of mind and those insurers should also be able to give practical advice on what to do to minimise the risk of accidents happening.
The first step to starting your business from home
Now that you have a good idea of what you need to start your business from home, the first logical step is to decide if you want to operate as a sole trader or a limited company. If you’ve decided that you want to register your business as a limited company, to protect your personal assets and finance as well as tax efficient, we can help.
We’re approved by companies house and have helped start and grow over 750,000 companies in the UK in the last 12 years. We have a range of formation bundles available starting from just £9.99. Click below to find out more