Start a business from home

Becoming a home business owner is a common choice for people who only need a small office. They may spend most of their time working on their clients' premises.

However, working from home may not be an option if it significantly changes the use of your home, or affects your local area, for example if you have lots of visitors. If you rent your home, your lease may include restrictions on using it for business purposes.

Advantages and disadvantages of home-based business

The major advantages are that you:

• don't have to spend a lot of money on office rental or office purchase
• save time and money by cutting your commute
• can be flexible around the hours you work

The disadvantages are:

• it may prove difficult to keep work and home-life separate, and there may be domestic distractions and interruptions
• a lack of contact with other people and businesses
• you might end up working long hours
• your mortgage, home insurance and tax situation may be affected

Addressing the disadvantages

It's important to keep your home and work life separate, especially if you have a family.

If you're feeling isolated from other people, Business Gateway and other organisations can provide you with details of networking events. You can also network with other businesses using social media.

If you do not yet have a home business idea, ask yourself three questions:

Is there a gap in the market? Have you tried to buy something that you just can't find? Others may be looking for that product too.

What is my passion/skill/hobby? Can you find a way of making a living from it?

Can I do something better? Have you seen someone offer a product or service that you think you can offer better yourself?

Popular home business ideas

Consider opportunities in your local area for services such as child care, tutoring, translation, editorial services, dog walking and alteration services.

Other common home-based businesses include:

• consultants
• website designers
• arts and craft makers
• publishers
• caterers
• virtual assistants who provide professional assistance to clients from a home office

You could also consider investing in a franchise. The benefits of being a franchisee are that you are your own boss but also have the benefit of working with a central team. There are a growing number of home-based franchise opportunities that you can explore.

Working 'five to nine'

You may want to consider starting a business while in full or part-time employment, using the evenings and weekends to build your business. This means that you will have money coming in while your business finds its feet. However, you might find it difficult to manage the extra hours and the extra work.

Your business plan

Once you have worked out a business idea, you need to create a written business plan.

You may need to buy, lease or rent equipment for your home office and any materials you need for the service you are supplying.

Finding and keeping in touch with customers can be a major issue, so investing in a good computer with relevant software and a broadband connection may well be a priority for you.

The most common costs to consider when starting out are:

• a computer
• broadband access
• mobile phone
• office desk or chair
• business cards
• stock - if you're supplying products

When you're factoring software packages into your start up costs, consider much cheaper or even free options - open-source software such as OpenOffice, Zoho, Google Docs and StarOffice.

Your work environment

It's important to create dedicated work space - it allows you to work without distraction and close the door on work at the end of the day.

Workspace priorities

You might consider marking the area you use for work. A spare room with a lockable door or an outbuilding are popular choices enabling home business owners to:

• deal with clients in a professional manner
• resist demands from other members of the household
• keep work equipment separate from home equipment

Allocating part of your house as a workplace can have tax and insurance implications.

You can create a space to call your own by:

• using office equipment in a general area of the house and putting it away when not in use
• housing your workstation in a cupboard, wardrobe or under-stair space with lockable shutters or doors

Work equipment and workstation setup

When setting up your work area you may want to consider:

• a fully adjustable chair and desk suited for computer use
• that your desk should be big enough for your computer, keyboard and monitor
• storage to keep office clutter free
• keeping your feet flat on the floor and your back straight when sitting at your desk - the top of your monitor should be at eye level

A health and safety risk assessment will be required for your work space.

Home business and planning permission

If you're making substantial changes to your home to accommodate your business it may be prudent to get in touch with your local authority regarding planning permission.

Keeping good records helps you:

• complete your tax returns easier and quicker
• pay the right tax at the right time
• avoid paying unnecessary interest and penalties

If you're using part of your home for business, it is important to keep your utility bills to keep track of the amount spent on your business.

Whatever type of business you run, you will need a home office area for admin tasks. You may need:

• a desktop computer or laptop and monitor so when working for long periods you can ensure the monitor is at eye level

• relevant software, including anti-virus

• fast broadband access

• mobile phone

• office desk - large enough to work at comfortably

• chair - fully adjustable so you can keep your feet flat on the floor and back straight

• storage to keep your desk clutter free

If buying office furniture, remember it can often be found second hand for minimal cost.

By creating a dedicated space, you can work without distraction, keep work matters and data confidential from others in the house, and switch off from work at the end of the day. A spare room with a lockable door or an outbuilding are popular choices enabling home business owners to:

• deal with clients in a professional manner without background noise and mess when on the phone and video calls

• resist demands and interruptions from other members of the household

• keep work equipment separate from home equipment

However you will need to check if allocating part of your house as a workplace and not using it for anything else can have tax and insurance implications.

You can also create a space to call your own by:

• using office equipment in a general area of the house and putting it away when not in use

• housing your workstation in a cupboard, wardrobe or under-stair space with lockable shutters or doors

There are many different opportunities that allow you to grow your home-based business.

Outsourcing

You can grow your business without increasing headcount or expanding your premises, by outsourcing, for example:

• accounts
• administration
• telemarketing - for generating leads
• PR
• design and copywriting

Developing relationships

The more you communicate with customers, suppliers and other entrepreneurs, the more business opportunities you will identify.

Social media can help you stay in touch with your customers and other businesses.

Meeting spaces

As your business grows, your home may no longer suitable for your business needs. Business centres can provide rented managed workspace and meeting facilities for occasional. These can be found in central locations in many towns across the UK.

For more information on growing your business, read our guide on options for growth.

The costs you incur from running your business from home can, in some cases, be allowable expenses which can reduce your tax bill, for example, items that are used solely for your business, such as laptops, or a proportion of gas, electricity and internet bills.

The way this works varies depending on whether you are self employed or your business is a limited company which has you and/or others as employees.

It can be quite hard to calculate the proportions of expenses such as gas and electricity that have been used for your home compared with your business. If you are self-employed, you can use HMRC's simplified expenses approach which provides flat rates.

There is an equivalent approach to tax relief for employees of limited companies, where you don’t have to keep evidence of extra costs. There are other homeworking expenses and benefits that are exempt from tax.

It may be helpful to seek professional advice before you claim other costs, eg those relating to using a room in the house solely for business purposes, as this can have other tax implications.

It's worth finding out about renting or buying business premises and choosing a location before making a final decision about whether working from home is right for you. Understanding what's involved with having separate business premises is useful if you plan to grow your business.

Ultimately, whether you decide to set-up at home, or elsewhere, you will still go through most of the same key stages when starting a business.