Many entrepreneurs in the UK are hanging up their ties and wondering whether they should work from home or rent an office space. Are you tempted by the convenience of a home office? Here’s some advice to help you make the right decision for you and your business.
Maybe you always dreamed of working as your own boss from your own home, or perhaps starting your one-man business is just the beginning of something much bigger. Either way, a home office will save you money on overheads and commuting, to say nothing of the stress both may have caused you in the past.
That being said, working from home isn’t for everyone. There are a number of legal, insurance, and tax details involved. Here are the pros and cons you should consider before launching your one-man business from home.
Working from home is gaining traction across the UK
People across the UK are turning to home-work in record numbers. In 2014, the Office for National Statistics estimated that approximately 4.2 million UK workers worked from home, of which 2.7 million used their home as a base from which to work elsewhere, and 1.5 million worked purely from their own home. This trend is continuing to grow. Some of these people still report to a boss but others, like you, work for themselves.
PRO: Lower running costs and tax burden for the self-employed
If you operate as a sole trader, you can claim part of your home’s running costs as a business expense. On that point, it is generally advisable to operate as a sole trader if you are a self-employed business of one. Unless, that is, your venture entails such risks that you wouldn’t want your personal savings or home to be vulnerable in the event things went awry.
At any rate, this option helps you reduce your expenses as you get started. Those directly related to your business are the most straightforward, but others may fulfil the dual purpose of business and personal use if you are working from home. Possibilities include your van and its running costs, mortgage interest or rent, utilities and internet access, furniture or home repairs, and council tax. For your van in particular, you can check fuel rates and allowances with HMRC. You might also consider simplifying your expenses by using flat rates instead of working out each individual business cost
CON: The tax impact on homeworking homeowners
For homeowners, one drawback is that the part of the property used for business activities may be subject to Capital Gains Tax when they sell their home.
You may also have to pay business rates on that part of your property. This is determined by the Valuation Office Agency (VOA), and whether they decide to give a rateable value on a section of your home. You should contact the VOA to find out if you’ll have to pay business rates , or your local assessor if you live in Scotland.
PRO: Wave most parking fees goodbye
If you have a garage or simply an area to park your van, you no longer need to pay for most of your parking. If your business only ever takes you to clients’ properties, you may even get rid of parking costs altogether! If your home is in a central location relative to your business area, being able to use it as a hub is another big plus.
CON: The decision is not always 100% up to you
Not that asking someone for permission is a major drawback in and of itself, but you should be aware that you may need to notify and/or obtain approval from various parties. These include your mortgage provider or landlord. If running your one-man business from home requires major renovations, you will also need to seek permission with your local planning office. And finally, if you plan to attract significant traffic – e.g. customers and/or deliveries – or intend to advertise outside your home, you’ll have to check with your local council .
PRO: No significant insurance requirements
You should absolutely check with your insurance company how running your business from home may affect your cover, but you shouldn’t fear any excessive complications. This is especially true if you are mainly performing simple office work, which generally doesn’t require you to break the bank. What’s more, many home insurers automatically cover basic equipment like computers, printers, and so forth.
That being said, if you do store merchandise, tools, or large amounts of operating cash in your home, additional insurance is recommended and may be required. In most cases this will be the same kind of commercial insurance required for any small business owner – nothing you’d avoid by working from an external office. If you expect to have clients visit you on a regular basis, you might consider adding public liability to your coverage.
CON: Inviting tax and admin matters into your home
By law, your records can be checked at any time by HMRC. While this wouldn’t be incredibly bothersome in a designated office, it can feel intrusive when your office is also your home. As with any new business, the authorities may demand to see your records. Make sure you keep these materials organised and prepared, as insufficient record-keeping is a fineable offense.
This may seem a trivial consideration, but some people cherish the ability to leave all and any business concerns at the door when they are at home. This is, obviously, a matter of personal preference and ability to compartmentalize.
PRO: Mastery of your workspace
Of course, one of the most valuable aspects of working from home is your ability to decide how you work. For one, you are free from the distractions of an office, where the day is often structured by the immediate needs of co-workers, subordinates, or managers. That leaves more time to do your own work and grow your business.