If your business base is your home, there are a number of issues that you will affect you:
Running Costs Allowable for Tax Purposes
If your business is based at home, you may include part of the running costs of your home in your accounts (i.e. deduct costs from income to calculate taxable profit). It is possible to do this either on a “flat rate” basis based on the number of hours work you do at home per month or on an apportioned actual cost basis. Your accountant can advise which method you can or should use. HMRC allows you to apportion the running costs of your home on a “fair and reasonable” basis between the private element of that cost - the part that relates to you actually living there - and the business element. If you use the actual cost basis (not the flat rate basis), the amount you can claim depends on the type of business you have and the work you actually do at home: you will need to take advice as to how to work this out. The type of “running costs” of your home that are eligible for apportionment can be as follows: mortgage interest that you pay to a lender, rent paid to your landlord, council tax (unless you need to pay business rates instead for the property), light and heat, phone and broadband, property repairs, water only if separately charged to the business.
Your domestic insurance policy will need to be extended to include use of your home for your business. (See our information page on Insurance above.) Part of the premium cost might be part of “Running Costs”.
You may have to pay business rates in addition to council tax. The Valuation Office Agency can advise you about this.
In certain cases you might need to obtain planning permission to use an existing, new, or converted part of your home. This is not likely if you have no employees, you use the room only for office purposes, do not advertise on the outside of the premises, and do not receive substantial numbers of deliveries or visitors.
Restrictions on Use
Even if planning permission is not required, there might be other legal constraints on whether and how you can use your home for business purposes. For example, if you own the freehold of your home, there might be restrictive covenants on the legal title which prohibit some or all business use. If you have a tenancy or long leasehold of your home, there might be covenants in the tenancy or lease agreement which contain such restrictions, or at least restrictions which apply unless you obtain the landlord’s consent to the proposed business use. If you have mortgaged your home, the mortgage might contain such restrictions on use. Even if there are no restrictions on the freehold title, your proposed use might disturb neighbours and cause a legal nuisance, for example, by noise caused or increased visitors to the property which neighbours might seek to prevent.
Health & Safety
The requirements of health and safety legislation will apply even if you work at home. (See our information page on Licences/Permits and Health & Safety above.)