Q&A: Setting up a home-based business

Starting your business from your home can be one of the most effective ways to keep your overheads down. Emma Jones of Enterprise Nation and StartUp Britain answers some questions about how to get it right.

Is starting a business from home still popular?

It’s the most popular option. More than 60% of people who start a business are now doing so from home. From fashion design, IT and catering through pet care and arts/crafts to accountancy and legal services – you name it – it’s being run as a business from someone’s home.

What are the key advantages of operating from home?

It’s low cost and therefore less risky, because there aren’t any expensive premises overheads. You can also claim for a percentage of your domestic bills, for lighting, heating, telephone calls, etc. A home office means no commute, so you save money and time. Cutting out a daily commute of 60 minutes each way frees up one whole extra day each week. That day can be spent earning money or with family/friends or enjoying leisure time.

Can a home-based business employ people?

Absolutely. The same employment rules apply and interestingly, because of such regulations, some home-based businesses are outsourcing and sub-contracting, rather than taking on staff. If you have people working in your home premises, you must carry out a proper health and safety risk assessment and be sure to find out about employment law.

But can’t the lines between work and home become blurred?

Possibly, if you don’t remain disciplined. People need to think about how the business will affect their home life – and vice versa. I recommend creating a dedicated work area, possibly a spare room, garden shed, attic or space under the stairs. This way, when you’re in that space everyone knows you’re working. And you can close the door at the end of the day and leave work behind.

Running a home-based business isn’t an easier option?

Not necessarily, no. When you’re starting out, you’ll need to put in the hours if you’re to make sales, keep customers happy and stay on top of your admin. Plus, there will be domestic responsibilities to take care of. Basing your business on something you enjoy helps. That way it doesn’t feel like work so much.

What other legislation applies to home-based businesses?

To run certain businesses, you must seek a licence. Also, you’ll need planning permission if you want to make significant changes to your property. This could be opposed. You can also run into problems if you become a nuisance to your neighbours, for example, through strange smells, excessive delivery or customer vehicles. And whether yours is simply a small sole trader business, or even a part-time venture, you must inform HM Revenue & Customs or register with Companies House. All earnings must be declared, of course.

What about insurance?

You can add a business element to your home insurance – it doesn’t cost much extra. It’s better to be protected. You should also inform your mortgage provider or landlord, as some agreements prevent people from running a business from their home without first seeking permission.

Is there any need for additional security?

As long as you already have good quality locks on doors and windows, maybe an alarm, you should be fine. You might need to take additional steps, if, for example, you’re planning to hold valuable stock or handle cash.

Sounds like you enjoy running a home-based business...

I do. Every day is different and one of the most wonderful things about being your own boss is the feeling of being in control, yet you still don’t quite know what tomorrow will bring.

For more information, you might like to see:

You can also find more detailed guidance on starting up on the Law Donut.