Running a business from home
When you first set up your business you often find yourself running your business from home. Most people make this decision based on cost, to dip their toe in the water and see how it goes or simply there is no need for premises. So what do you need to think about?
Advantage and Disadvantages
- No time spent travelling
- Low cost
- You can work the hours you want
- It takes up space
- Cant separate personal form work easily
- Can take over your home
- Hard to switch off
- Distractions – Just do the washing up etc. Self Discipline
Things to Consider:
Where you work? Depending on the type of business you will be running you need to make sure you have sufficient space that you can work effectively. If all you need is a laptop then it is much easier than if you need to store stock.
When will you work? You may need to set timeslots so that you family know not to disturb you and so that you aren’t drawn into finding other things to do such as housework etc.
Dedicated space - You will also need a dedicated space to store your paperwork. Good, organised record keeping is a key factor in the success of your business so if you get it right from the start it will make life a lot easier
Work/Life Balance – One of the difficulties of running a business from home is achieving a decent work/life balance. Whilst this working at home can improve the balance It’s very easy to get drawn into working all the time.
There is no doubt that running your business is hard work and requires long hours, however, you also need to make sure that you have some time away from work.
Separate work from home – How will you keep work separate from home?
Do you need a separate phone line? – You can have an additional phone line installed at a relatively low cost, or alternatively you could look at using an internet based phone (VOIP phone) which works using your computer or a handset connected to the internet.
What happens when the phone rings? Are you always going to be able to answer it? Will the kids get there before you do? You may wish to consider employing a Telephone answering service which will make sure you don’t miss any calls and that messages are given to you. Alternatively you may decide that Voicemail is acceptable
What address will you use? Do you want your customers knowing your home address? You could consider using a virtual office and mail forwarding service. These are available in most town centres.
Do you need to meet people? You may be comfortable with customers visiting you at home but if not, you can always meet at their premises, in a coffee shop or hotel. If you need peace and quiet you could always rent a room in a serviced office, often these are available for time periods as short as an hour. More often than not, it will be provided by the same people as the same address as your virtual office if you decide to use one.
Do you need staff? If you need to employ people will you be happy with them working from your home? If so you need to comply with the various Health and Safety rules and employment legislation so take this into account
What if friends pop in for coffee during the day? When people know you will be home you may find you get more visitors with friends just popping round for coffee. If this is likely to happen to you it would be wise to find a way of dealing with it. It could be as simple as telling your friends you are working between x and y.
Who do you need to tell?
Mortgage Provider or Landlord. You will need to let your mortgage provider or landlord know that you are running a small business form home. In most cases there won’t be any issues but it is best to seek permission just in case!
Home Insurance – Generally, if you are simply doing work using a computer or telephone you won’t have to let your home insurance company know that you are working from home, however it is worth checking that all of your equipment is covered by the policy.
If you need to add business insurance to your home insurance policy, it doesn’t tend to cost much extra and you just need to phone your insurance provider to arrange the additional cover.
Depending on your business, the insurer may not be concerned and require additional cover but you always need to check. There would be nothing worse than having something go wrong and it not be covered.
Local Council – For some businesses you need to apply for licences, also if you are going to be having lots of deliveries, customers or want to advertise outside your home you may need council permission. If you dedicate part of your property to business use, then you may have to pay business rates whilst the rest of the property is subject to Council Tax. This is particularly an issue if, for example, you have a consulting room at home.
Planning Department – If you need to make major changes to your home to accommodate your new business you may need to get planning permission.
Neighbours – It is always worth letting your neighbours know that you have set up a business form home, particularly if you are having customers visit you or if there is likely to be extra noise or inconvenience for them. It’s always best to head off any issues with neighbours before they arise. You never know they may even provide you with more business!
HMRC – See the section on Business Structure and Tax for more information on this but if you are self employed you need to let HMRC know within 3 months of starting trading.
What can you claim against tax for working from home?
If you work form home you will be able to claim some expenses against your tax bills and have 2 options. You can either claim a proportion of actual costs that you have spend on things such as electricity, council tax, insurance, mortgage interest, rent, heating and lighting to name a few. If you claim on this basis you need to work out your business proportion based on floor space, number of rooms and hours spent. Most accountants can give you a calculator to do this for free. Alternatively, drop us a line and we send you one.
Alternatively, you can claim a fixed amount depending on how many hours you have been working.
Another thing to consider is Capital Gains Tax, you don’t have to pay capital gains tax if you sell your main residence, however, if there is a part which is used soley for business use you may have to pay Capital Gains Tax on that proportion for the time it has been used 100% for business
As always, it is worth getting professional advice from your accountant who can help you with tax planning, guide you in exactly what can be claimed and what needs to be paid.
Some tips for working from home
- Make sure your family know what you are doing and what times, make sure you are not disturbed
- Establish a structure – I heard of one person getting up going to work as normal, driving around the block and coming back to his home office again, no need to do this but you get the idea
- Set yourself some boundaries i.e you work between x and x, the temptation to just do this job is great
- Separate home from business – Make sure that you know when someone is contacting you for business and when it’s personal – Get separate email addresses, telephone numbers