The number of people running their own business from home is on the up.
According to research by Barclays, 38% of small and medium-sized businesses are run from UK homes
, while so-called ‘homepreneurs’ have increased by 3% over the past five years.
Operating a home business can give you the best of both worlds. Not only do you enjoy the benefits of being a small business owner, you also get to work flexible hours, avoid the daily commute and enjoy certain tax advantages.
It’s easy to see why so many people are choosing to run their own business from home. But is it right for you?
What is considered a home-based business?
Let’s start with the basics. The definition of a home-based business is one whose primary office is in the business owner’s home. The business can be any size or in any sector as long as the office itself is located in a home.
And there’s plenty of these home-based businesses out there. In fact, figures tell us that the majority of business start life in a bedroom, spare room, garage or basement – just look at Apple, Hallmark, SpareRoom and Baskin-Robbins for proof of that fact.
What do I need to think about?
Starting a new business can be stressful. There’s a lot to think about, but with a bit of planning you can get it all done.
Here are some of the key things to think about.
Setting up your business legally will involve things like arranging business ownership, registering a business name and getting licensed. Seek independent legal advice to help you get it right.
Understand the risk
Any new business venture comes with a level of risk. Calculating, understanding and planning for that risk is vital. There are risks in any industry, but there is also a huge personal risk that comes with starting a business. Make sure you determine how you and your business will be affected.
There are several insurance covers
to consider as a home-based business owner. Some are must-haves, while others are more nice-to-haves. These include:
· Professional indemnity insurance
: covers you if you make a mistake or provide inadequate services to a customer. Find out more about bespoke professional indemnity insurance policies
for all types of business through Insurance Choice here
· Public liability insurance: covers you if a client or customer suffers an injury or damages their personal property while on the business premises.
· Product liability insurance: covers you if a product you sell causes illness or injury to a customer.
· Employers’ liability insurance: covers you if an employee gets injured, ill or their personal property is damaged as a result of working for your business.
· Buildings insurance: covers damage caused unexpectedly (flood, fire, storm or theft) to the building.
· Contents insurance: covers the items in your home (furniture, electronics, money etc) against loss, damage or theft.
· Personal accident insurance: covers you if you are involved in an accident and are out of action for a while.
When choosing an insurance policy always consider the level of cover you think you will need. Do some research into the typical claims made in your industry to help you set a figure.
If you run a small business from home you will have to pay tax at some point. However, with lots of complex tax rules in the UK, knowing which ones apply to your business can be tricky.
Income tax, NI, corporation tax, VAT and business rates all need to be on your radar. If you are in any doubt, speak with an accountant or HMRC for advice.
Do I need permission to run a business from home?
If you are wondering whether you need permission to run a business from your home, then the short answer is yes. As well as ensuring you have a tailored professional indemnity insurance policy
in place, if you are starting a small business at home you will also need to speak with several organisations before you do so.
Depending on what house you live in, here’s what you need to know.
1 Running a business from a council house
You will probably need written permission from your local council or housing association so check with them first. Some councils are actively encouraging people to start their own business, but if your council doesn’t agree it could just be a case of signing additional agreements.
Getting permission will have a lot to do with the type of business you are planning to set up. If it could cause a nuisance to neighbours, permission is less likely to be granted.
2 Running a business from a rented house
Your first port of call will be getting written permission from your landlord to run a business from a rented home. Your landlord can’t ‘unreasonably’ withhold or delay their consent, but they can refuse if they believe it will result in too much wear and tear, create a nuisance for neighbours, or the business would be better suited in a commercial property.
3 Running a business from a house you own
First up, check with the Land Registry if there are any ‘restrictive covenants’ prohibiting certain uses of your home. If the business you are setting up causes damage or hinders your neighbours’ enjoyment of their home you could find yourself in court.
Also, check the terms of your mortgage and get permission from your lender if required. You may need planning permission if you are making changes to your home or if running a business will cause a material change in the use of your property.
Plus, it’s worth remembering that you may have to pay more Council Tax if you are running a business from your home.
How does running a business from home affect my insurance?
A standard home insurance policy is unlikely to cover business activity or items such as stock, computers or customers visiting your premises. You need to make sure you have the right insurance in place
before you start.
Some policies might cover home office equipment up to a certain level, but additional cover may be needed for more expensive items.
When you are providing a professional service, you need the right protection if things go wrong. At Insurance Choice, we can find you quotes on bespoke professional indemnity insurance policies
tailored to your business’ requirements.
Find out what we can offer you and your home-based business. Get a quick quote today.