Running a business from home

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