Guide
Where to run your business
Home-based vs commercial premises - a decision framework for choosing where to operate.
Where you run your business affects your tax position, legal obligations, insurance requirements, and operational costs. Understanding these differences upfront prevents costly mistakes.
There are five main options, each with different regulatory and financial implications:
- Working from home — lowest cost, but may need planning permission and mortgage lender approval
- Serviced offices and co-working — flexible terms, typically 1-12 months, all-inclusive pricing
- Renting commercial premises — standard commercial leases of 3-25 years with significant legal obligations
- Buying premises — capital investment with full control but less flexibility
- Pop-up and temporary premises — short-term lets for retail, events, or testing a location
- Tax: Allowable expenses
- Home: flat rate £6/week (£312/year) or actual apportionment of costs | Commercial: full rent, rates, utilities, and maintenance deductible
- Capital gains tax
- Home: may trigger partial CGT on property sale if a room is used exclusively for business | Commercial: no primary residence exemption applies
- Health & safety
- Home: Workplace Regulations 1992 apply if you employ staff at home | Commercial: full premises responsibility including 16°C minimum temperature and 11 cubic metres per person
- Insurance
- Home: standard home insurance typically excludes business use — check your policy | Commercial: commercial property insurance, employers liability (if staff), and public liability usually required
- Business rates
- Home: usually exempt unless a room is used exclusively for business | Commercial: payable based on rateable value, with small business rate relief available in all UK nations
Working from home
Most sole traders and small partnerships start from home. You generally do not need planning permission if your home remains primarily a residence, there is no significant increase in traffic, noise, or disturbance, and you do not alter the external appearance of the property.
Key obligations:
- Mortgage or tenancy: Check your mortgage conditions or tenancy agreement. Many lenders and landlords require notification, and some restrict business use. Failing to inform them could invalidate your mortgage or breach your lease.
- Tax implications: You can claim a flat rate of £6 per week (£312/year) without receipts, or calculate the actual proportion of household costs (mortgage interest, utilities, council tax, broadband) used for business. HMRC requires records if you use the actual costs method.
- Capital gains tax risk: If you use a room exclusively for business (not mixed use), HMRC may reduce your private residence relief when you sell. Avoid dedicating a room entirely to business use.
- Insurance: Standard home insurance policies usually exclude business use. You need either a home business insurance extension or a standalone business policy.
- Registered office address: If you are a limited company, your registered office must appear on public registers. Use a registered office service (from £50/year) to keep your home address private.
Serviced offices and co-working spaces
Serviced offices provide fully fitted, managed workspace on flexible terms — typically 1-12 month licences rather than long leases. They are a good middle ground between home and committed commercial premises.
What is included: Rent, business rates, utilities, reception services, broadband, furniture, and building maintenance — usually one monthly payment. Some providers include meeting rooms, mail handling, and virtual office services.
Costs: Typically £200-£600 per desk per month in regional centres, £400-£1,000+ in London. Hot-desking is cheaper than dedicated desks.
Legal structure: Most serviced offices use a licence to occupy rather than a tenancy. This means you do not have security of tenure under the Landlord and Tenant Act 1954, but you also have far fewer obligations than a commercial tenant.
Renting commercial premises
Commercial leases are very different from residential tenancies. They are longer (typically 3-25 years), place more obligations on the tenant, and are difficult to exit early.
Key lease terms to negotiate:
- Lease length and break clauses: Negotiate a break clause (e.g. option to exit at year 3 or 5) — without one you are committed for the full term. The RICS Code for Leasing Business Premises (2020) sets best practice standards.
- Rent reviews: Upward-only rent reviews are common and mean your rent can increase but never decrease during the lease. Consider agreeing an open market review instead.
- Repairing obligations: A full repairing and insuring (FRI) lease makes you responsible for all repairs and the building insurance premium. For older buildings, get a schedule of condition to limit your repair obligations to the state of the property at the start of the lease.
- Landlord and Tenant Act 1954: Part II gives business tenants security of tenure — the right to renew the lease when it expires. Landlords often ask you to contract out of this right. Take legal advice before agreeing.
Get legal advice: Always have a commercial property solicitor review the lease before signing. Budget £1,000-£3,000+ for legal fees.
Business rates
If you occupy commercial premises, you will usually pay business rates (non-domestic rates). The amount depends on your property's rateable value and where in the UK you operate.
Small business rate relief:
- England: 100% relief for properties with rateable value up to £12,000 (tapered relief up to £15,000)
- Scotland: 100% relief under the Small Business Bonus Scheme for rateable value under £15,000 (tapered relief up to £35,000)
- Wales: 100% relief for rateable value up to £6,000 (tapered relief up to £12,000)
- Northern Ireland: 50% reduction for properties with Net Annual Value up to £2,000
Retail, Hospitality and Leisure Relief (England): 40% relief in 2025/26 for eligible premises. New discounted multipliers apply from 2026.
Health and safety for your premises
If you employ anyone, the Workplace (Health, Safety and Welfare) Regulations 1992 apply to your premises. Key requirements include:
- Temperature: Minimum 16°C for sedentary work, 13°C for physical work
- Space: At least 11 cubic metres per person
- Ventilation, lighting, and sanitation: Adequate for the number of people working
- Fire safety: Fire risk assessment required under the Regulatory Reform (Fire Safety) Order 2005. Responsibility falls on the 'responsible person' (usually the employer or building owner)
These apply whether you work from commercial premises, a serviced office, or employ people at your home.
Limited companies need a registered office address
Every limited company must have a registered office address that appears on the public register at Companies House. If you work from home and want to keep your address private, use a registered office service (from around £50/year). Your registered office does not need to be the same as your trading address.
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Assess your workspace needs
Consider how many people will work there, whether clients visit, storage requirements, and growth plans for the next 2-3 years.
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Check your mortgage or tenancy terms
If working from home, review your mortgage conditions or tenancy agreement for any restrictions on business use.
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Get specialist insurance
Standard home insurance excludes business use. Get a home business extension or standalone business policy.
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Take legal advice on commercial leases
Before signing any commercial lease, have it reviewed by a commercial property solicitor. Budget £1,000-£3,000+.
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Apply for small business rate relief
If occupying commercial premises, check eligibility for small business rate relief — 100% relief available in England for rateable values up to £12,000.
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Complete a fire risk assessment
Required for any commercial premises. If you employ 5 or more people, document the assessment in writing.