Can you run a limited company from home?

It’s a question that start-ups and SMEs often ask, usually prompted by the need to keep overheads as low as possible while getting the business off the ground.

The answer is less clear-cut, however, and much will depend on where you live, whether you’re the property owner or tenant, and the kind of company you want to run from home.

What’s in this guide?

• What if you own the property?
• What about the neighbours?
• What does your mortgage say?
• Planning permission
• Council tax and business rates
• Rented or leased property
• Running a business from a council house
• Running a business from a garage or shed
• What about insurance?

What if you own the property?

Before going ahead, you need to find out if any so-called restrictive covenants prohibit certain uses of your property, including a ban on business use.

The title to the property should list any restrictions. You can check property information through HM Land Registry.

Also, be sure to check the documents your solicitor gave you when you bought the house to see what restrictions, if any, are present.

Bear in mind, though, that more people than ever run small businesses from home without encountering any issues. This is especially true if they’re operating a low-impact venture, like freelancing or selling online.

While it’s always better to check the legalities first, in practice, enforcement of restrictive covenants in residential areas can vary a great deal.

What about the neighbours?

Even if there are no restrictions, starting a business at home could cause a nuisance to neighbours through extra noise, increased visitors or deliveries to the property, etc.

Of course, this will depend on the type of business you are planning, but if the neighbours complain and the nuisance hinders their enjoyment of their property, you could face legal action.

If you’re setting up a business that might generate occasional visitors or deliveries, it’s worth having a friendly chat with your neighbours first to explain your plans.

Good communication up front can avoid many potential issues.

What does your mortgage say?

Double-check the terms of your mortgage to see if you need the lender’s consent first. If you have a residential mortgage, this may restrict or prohibit certain types of business use.

Doing so without notifying them could be considered a breach of your mortgage terms.

That said, in reality, most home businesses – especially low-key ones – aren’t going to raise red flags with mortgage providers, as long as you’re not making major changes to the property or generating substantial foot traffic.

For peace of mind, double-check with your lender.

Planning permission

You do not normally need planning permission simply because you work from home.

The key question is whether running the business results in a material change in the use of the property. If the business remains incidental to the property’s use as your home, planning permission will not normally be required.

If you intend to make structural changes to your home or the nature of the business is likely to materially change the use of the property, you should consult your local planning authority before going ahead.

Depending on your business type, you may also need to apply for a licence from your local authority.

Businesses that may require licences include childcare businesses, B&Bs and guesthouses.

For more guidance, visit your local council’s website or consult the Planning Portal, which offers detailed information about planning and building regulations in England and Wales.

Council tax and business rates

Running a business from your home does not automatically mean you have to pay business rates.

You will not usually have to pay business rates if you use only a small part of your home for business purposes – for example, using a bedroom as an office – or if you sell goods by post.

You may have to pay business rates as well as Council Tax if:

• part of the property is used mainly for business rather than domestic purposes;
• customers or clients regularly visit the property;
• you employ other people to work there; or
• you have made alterations for business use, such as converting a garage into a salon or workshop.

The Valuation Office Agency (VOA) decides whether part of a property in England or Wales should have a rateable value. Your local council then bills and collects any business rates due.

See the GOV.UK guidance on business rates for home-based businesses.

Rented or leased property

Check the terms of your lease or rental contract.

You may need your landlord’s permission before operating a business from the property.

If the landlord consents, make sure you have that permission in writing and check whether the tenancy agreement needs to be amended.

A landlord may refuse permission if they think the nature of your business will cause extra wear and tear to their property, cause a nuisance to neighbours or otherwise breach the terms or permitted use of the property.

If you are unsure whether your landlord can refuse consent under your particular tenancy or lease, seek legal advice.

Running a business from a council house

Always consult your housing association or local council to check if you can run your business from your council house.

Much will depend on the nature of the business, but if they do grant you consent, you may have to agree changes to your tenancy.

On the other hand, the council or housing association can refuse permission if they think the business will be a nuisance to neighbours, cause excessive wear and tear or conflict with the terms of your tenancy.

It’s important to note that running a business from your council home could affect your council tax and, depending on your circumstances, benefits such as Universal Credit or Housing Benefit.

Running a business from your garage or shed

If you are setting up an office in your garage, for example, and don’t make a material change to the building or cause a nuisance to your neighbours, as described above, there is nothing to stop you from going ahead.

If the nature of your business changes in future or the operation expands, you may have to seek planning permission or apply for a licence.

Keep in mind, however, that even small changes – like adding a sign outside your property – might require permission, so it’s better to double-check with your council.

What about insurance?

If you have buildings and contents insurance for your home, check to see if running a business will affect the terms of your policy and what is and isn’t insured.

You may have to seek your provider’s consent before going ahead or arrange additional business cover.

Home insurance may not cover business equipment, stock or customers visiting your premises, so tell your insurer exactly how you plan to use the property.

If members of the public visit the property, consider public liability insurance.

If you employ staff, employers’ liability insurance is normally a legal requirement.

The GOV.UK website has more information on running a business from home.

Using your home as your limited company’s registered office

If you run a limited company from home, you can also use your home as the company’s registered office address, provided it meets the Companies House requirements.

Bear in mind that the registered office address appears on the public Companies House register. If you would rather keep your home address private, you can use another appropriate address instead.

A director can also use a separate service address for the public register.