Where to run your business

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 costs least, but you may need planning permission and your mortgage lender's agreement.
• Serviced offices and co-working spaces offer flexible terms, typically 1 to 12 months, at an all-inclusive price.
• Renting commercial premises usually means a lease of 3 to 25 years with significant legal obligations.
• Buying premises takes capital and gives you full control, but less flexibility.
• Pop-up and temporary premises are short-term lets for retail, events or testing a location.

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 outside of the property.

Check your mortgage conditions or tenancy agreement before you start. Many lenders and landlords require you to tell them, and some restrict business use. Standard home insurance may not cover your business, so you may need a home business extension or a separate policy.

You can claim part of your household costs against tax, either at HMRC's flat rate or as a share of actual costs. If you use a room only for business, HMRC may reduce your private residence relief when you sell, so keep some personal use of the room.

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.

The monthly fee usually covers rent, business rates, utilities, reception services, broadband, furniture, and building maintenance. Some providers include meeting rooms, mail handling, and virtual office services.

A desk typically costs £200 to £600 per desk per month in regional centres and £400 to £1,000 or more in London. Hot-desking is cheaper than dedicated desks.

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.

Negotiate these lease terms:

• Ask for a break clause, such as an option to leave 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.
• 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. A ban on upwards-only rent reviews in new business leases in England and Wales will apply from a date set by regulations; it is not yet in force.
• 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.
• Part II of the Landlord and Tenant Act 1954 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.

Always have a commercial property solicitor review the lease before you sign. Budget £1,000 to £3,000 or more 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. Each nation runs its own small business rate relief scheme, which can cut or remove the bill for small properties.

Health and safety for your premises

If you employ anyone, the Workplace (Health, Safety and Welfare) Regulations 1992 require a reasonable indoor temperature and sufficient working space. HSE's Approved Code of Practice L24 gives these normal workplace benchmarks:

• a temperature of at least 16°C for sedentary work, or 13°C where work involves rigorous physical effort
• at least 11 cubic metres of space per person
• ventilation, lighting and sanitation adequate for the number of people working

You also need a fire risk assessment. The duty 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.