Guide
Running a business from home
Rules and considerations for home-based businesses.
Running a business from home is the lowest-cost way to start. Most home businesses do not need planning permission — but there are important tax, insurance, and legal considerations to address before you start trading.
The key legal test is whether your home remains primarily a residence. Under Town and Country Planning Act 1990 s.55(2)(d), using part of a dwelling for purposes incidental to its residential use is not development and does not require planning permission.
When you need planning permission
You are likely to need planning permission if any of these apply:
- Your home is no longer primarily a residence — the business use has become the dominant use of the property
- There is a marked increase in traffic, noise, or disturbance to neighbours (deliveries, client visits, machinery)
- You employ people who come to your home to work
- You make external alterations to the property (signage, separate entrance, storage structures)
- You sell goods from the premises directly to visiting customers
Common examples that usually do not need planning permission: freelance writing, graphic design, bookkeeping, online retail (dispatching by post), software development, tutoring (small numbers).
If you are unsure, contact your local planning authority for an informal opinion before starting. You can also apply for a certificate of lawful use to get formal confirmation.
Tax deductions for home workers
You can claim a tax deduction for the business use of your home using one of two methods:
HMRC simplified expenses (flat rate):
- 25-50 hours per month working from home: £10/month
- 51-100 hours per month: £18/month
- 101+ hours per month: £26/month (£312/year)
This is the simplest method and requires no receipts — just a record of hours worked from home.
Actual costs method:
Calculate the proportion of household costs used for business. Allowable costs include mortgage interest (not capital repayments), rent, council tax, utilities (gas, electricity, water), broadband, home insurance, and repairs to the business area. Divide costs by the number of rooms (or by floor area) and by the proportion of time the room is used for business.
Example: If you use 1 of 5 rooms for business for 40 hours in a 168-hour week, deduction = total costs × 1/5 × 40/168.
Capital gains tax risk
If you use a room exclusively for business, HMRC may reduce your private residence relief when you sell your home. This means part of any gain on the property sale could be subject to Capital Gains Tax.
How to avoid this: use the room for some personal purposes too (a spare bedroom that doubles as an office, for example). If the room has genuine mixed use, private residence relief is not affected.
If you have already established exclusive business use, you may still benefit from lettings relief or the CGT annual exempt amount (£3,000 for 2024/25 onwards). Take professional tax advice before selling.
Insurance
Standard home insurance policies typically exclude business use. If you make a claim related to business equipment or a work-related incident, your insurer could refuse it — and may void your entire policy.
Options:
- Home business insurance extension: Add a business use endorsement to your existing home policy. Costs around £30-£100/year depending on business type.
- Standalone business insurance: Separate commercial policy covering equipment, public liability, and professional indemnity. More comprehensive but more expensive.
- Public liability: Essential if clients or customers ever visit your home
- Employers' liability: Required by law if you employ anyone, even at home
- Planning permission
- Not usually needed if home remains primarily a residence with no significant external change
- Tax deduction: simplified
- £10/£18/£26 per month depending on hours worked (no receipts needed)
- Tax deduction: actual costs
- Proportionate share of mortgage interest, rent, council tax, utilities, broadband, insurance
- Business rates
- May apply if a room is used exclusively for business — check with your council's valuation office
- CGT risk
- Exclusive business use of a room may reduce private residence relief on property sale
- Mortgage/tenancy
- Most lenders and landlords require notification — failure to inform could breach your agreement
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Check your mortgage or tenancy agreement
Review for restrictions on business use. Contact your lender or landlord to inform them before starting. Failure to notify could breach your agreement.
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Assess whether planning permission is needed
Consider whether your home will remain primarily a residence. If in doubt, contact your local planning authority for an informal opinion.
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Choose your tax deduction method
Decide between HMRC simplified expenses (easier, flat rate) or actual costs (potentially more tax relief but requires records). You can switch methods between tax years.
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Update your insurance
Contact your home insurer about a business use extension, or arrange standalone business insurance. Check whether you need public liability or professional indemnity cover.
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Avoid exclusive business use of a room
To protect your private residence relief from CGT, ensure any business room also has genuine personal use (even occasional).
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Consider a registered office service
If you are a limited company, use a registered office service (from £50/year) to keep your home address off the public Companies House register.