How to Start a Business From Home in the UK (2026/27 Guide)

Published: 19 September 2026 | Last updated: September 2026 | Tax figures apply to the 2026/27 tax year (6 April 2026 to 5 April 2027)

Running a business from the spare room, the kitchen table or a garden office is how a huge number of UK firms begin. The overheads are low, there’s no commute, and you can test an idea before signing a lease on anything.

The catch is that your home comes with its own rules. Your lender, landlord, freeholder, council and insurer may all have a say, and the way you use the space affects your tax. This guide takes you through each of them in the order you’ll meet them, with 2026/27 figures. If you’re still deciding what to sell, our round-up of home-friendly business ideas is a better place to start.

Can you run a business from home?

For most desk-based work, yes, and with very little red tape. Consultancy, bookkeeping, design, writing, tutoring online, coding and selling online from a spare room rarely raise eyebrows with anyone.

The checks get more serious once your business affects the building or the street. Think customers arriving at the door, staff working on site, deliveries every day, strong smells, noise, or equipment that needs structural changes. Some trades also need a licence or registration wherever they operate. Food businesses, childminding, beauty treatments and animal boarding are common examples, and home-based versions are not exempt.

Who you need permission from

Who you need to ask depends on how you hold your home. GOV.UK’s guide to running a business from home lists the usual parties: your mortgage provider or landlord, the local planning authority and the local council.

Who you need to ask depends on how you hold your home.

Homeowners with a mortgage

Read your mortgage conditions. Many residential mortgages require the property to be used as your home, and some ask you to tell the lender about any business use. For quiet office-type work, consent is usually straightforward. Keep the lender’s reply with your records.

Private renters

Your tenancy agreement may ban business use outright or require the landlord’s consent. Ask in writing, explain exactly what you’ll be doing, and point out if clients won’t visit. Some landlords agree to a formal “home business tenancy”, which protects both sides. If permission is given, ask for your agreement to be updated so it’s on record.

Council and housing association tenants

Social housing tenancies usually need the landlord’s permission for business use. Councils often have a simple request form. Low-impact businesses, such as online work or sewing alterations, are commonly approved.

Leasehold flats and restrictive covenants

Leases often say a flat may be used only as a private home, and older freehold houses sometimes carry similar covenants in the title deeds. A laptop business rarely breaches the spirit of these clauses, but visitors, signage or stock deliveries might. If the wording is unclear, ask the freeholder or managing agent before you trade.

When planning permission applies

Planning permission isn’t needed simply because you earn money at home. It becomes relevant when the business changes the character of the property: regular customer or client visits, staff who don’t live there, extra traffic or parking, noise or smells, or building work such as converting a garage into a salon. If you’re unsure, ask your local planning authority. Some councils offer informal advice, and a formal confirmation (a lawful development certificate) is available if you want certainty.

How to start a business from home: step by step

1. Check permissions. Work through the table above and get any consent in writing before you start trading.
2. Choose a structure. Most home businesses start as sole traders, but read our guide to choosing between sole trader and limited company if your work carries real liability risk.
3. Register. Sole traders register with HMRC for Self Assessment once their trading income is more than £1,000 in a tax year. Companies register with Companies House first. Our step-by-step guide covers registering with HMRC or Companies House.
4. Check licences and registrations. Food businesses must register with their local council at least 28 days before trading. Childminding, animal boarding, beauty treatments and street trading often need their own licence. If you hold customers’ personal details, check whether you need to pay the ICO data protection fee (£52 a year for most small businesses).
5. Sort insurance. Tell your home insurer and add business cover where needed (see below).
6. Set up money and records. Open a separate account for business money, and keep a monthly log of the hours you work at home. That log supports any use-of-home claim later.
7. Protect your address and data. Decide which address will appear on invoices, your website and any public register before your home address ends up everywhere.

Business rates and council tax

Usually not for ordinary home working. You may need to pay business rates if part of your home is used only for business, you sell to customers who visit, you employ people there, or you’ve altered your home for the business. Small business rate relief can reduce or remove the bill.

The more the space looks and works like business premises, the more likely rates apply.

In England and Wales, the Valuation Office Agency decides whether part of a home should be rated. If it is, GOV.UK notes that you may qualify for small business rate relief where the rateable value is £15,000 or less. Council tax normally continues on the part of the home you live in, so business rates, where they apply, are usually charged on the business part alongside it rather than instead of it.

What home costs can you claim?

Sole traders can claim either HMRC’s flat rate or a share of actual household costs. The flat rate is £10 a month for 25–50 business hours at home, £18 for 51–100 hours and £26 for 101 hours or more. Phone and broadband business use is claimed separately under either method.

The flat rate (simplified expenses)

The flat rate needs no bills or calculations, just a record of your hours. You can’t use it in a month where you work fewer than 25 hours at home. The full rules are on GOV.UK’s page on simplified expenses for working from home. The maximum is £312 a year, which suits light use but undervalues heavy use.

The actual-cost method

Here you total the relevant household bills and claim the business share. Typical bills include heating, electricity, council tax, water, home insurance, and mortgage interest or rent (the interest only, never the capital repayments). Most people split the costs by the number of rooms, then by the share of time a room is used for business. Keep the bills and your working-out, because HMRC can ask to see them.

Illustrative example: flat rate vs actual costs

The flat rate is simpler; actual costs usually pay more for heavy home use.

The actual-cost method is worth about £180 more a year here, in return for keeping bills and a clear method. Her phone and broadband business use would be claimed separately under either approach. Because the room also serves as a guest room, she avoids the business rates and Capital Gains Tax issues that come with exclusive business use. More on that below.

If you run a limited company

Simplified expenses aren’t available to companies. Instead, your company can pay you up to £6 a week (£26 a month) tax-free towards the extra cost of working from home, without receipts, where there’s a homeworking arrangement in place. It can pay more if you can evidence the actual extra costs. Some directors instead have the company pay a modest fee for using a room under a written agreement, but that needs careful handling because it can create taxable income for you.

One 2026 change matters here. From 6 April 2026, employees, including company directors, can no longer claim tax relief for unreimbursed home-working costs through Self Assessment or their tax code. If your company doesn’t pay the allowance, you get nothing. For more ways to cut your bill, see our round-up of other tax reliefs small businesses often miss.

Insurance: what your home policy won’t cover

Standard home insurance is written for a household, not a business. It may not cover business equipment, stock, or anyone who visits in a business capacity. Worse, failing to tell your insurer about business use could put a claim at risk, even an unrelated one, such as a burst pipe. GOV.UK’s guide on running a business from home flags the same gap.

Start by telling your insurer. Some add limited business cover to a home policy for a small extra premium. Beyond that, the covers home businesses most often need are:

• Business equipment and stock cover, for laptops, tools and goods held for sale.
• Public liability, if clients, customers or couriers come to your door.
• Professional indemnity, if you give advice or provide a professional service.
• Employers’ liability, which is a legal requirement once you employ someone, with limited exceptions.
• Business use on your car insurance, if you drive to clients or make deliveries.

Keeping your home address private

Your address can end up in more places than you expect. Three to plan for:

• Companies House: a company’s registered office appears on the public register. Since March 2024, it must be an “appropriate address” where documents will reach someone. Many directors use their accountant’s address or a registered office service to keep home private.
• Invoices and letters: sole traders trading under a business name must show their own name and an address where documents can be served. It doesn’t have to be your home.
• Your website: online sellers must give customers a geographic address. Check that any alternative you use meets that rule.

What most people get wrong

Turning a room into a dedicated office without thinking it through. A room used for nothing but business looks tidy on a tax return, but it can have two costly side effects. It may bring that part of the home into business rates. It can also mean that part of your home doesn’t get full Capital Gains Tax private residence relief when you eventually sell. A room with some genuine private use (a guest bed, a family computer, the children’s homework) usually sidesteps both. Your claim then reflects the business share of time.

Assuming “it’s only a laptop” means no one needs to know. Lenders and insurers care less about the laptop than about not being told. A short email asking for consent costs nothing. An insurer finding undeclared business use after a claim can cost a great deal.

Claiming the wrong mortgage costs. Only the interest part of mortgage payments can go into an actual-cost claim. Capital repayments can’t. And you can’t use the flat rate and also claim the same household bills on top.

Directors waiting for relief that no longer exists. Since April 2026, a director who pays home costs personally can’t reclaim them from HMRC. The £6-a-week allowance has to come from the company.

Common mistakes

• Trading before registering for food hygiene or a licence. Councils can stop you trading, and some registrations must be in place weeks before your first sale.
• Running business money through a personal account. It makes records messy, expense claims harder to prove, and your year-end much slower.
• Ignoring the neighbours. Daily couriers, parked client cars and noise are what usually bring complaints, and complaints bring council attention.
• Putting your home address everywhere by default. Once it’s on a public register or a website, it’s hard to remove.
• Forgetting the data protection fee. Holding customer names, emails or addresses on a computer usually means paying the ICO’s annual fee.

Your home business launch checklist

Frequently asked questions

How do I start a business from home in the UK?

To start a business from home in the UK, check your mortgage, tenancy or lease allows it, choose a structure, and register with HMRC or Companies House. Then arrange business insurance, check whether you need a licence, planning permission or business rates, and keep records so you can claim part of your household costs.

Do I need permission to run a business from home?

Often, yes. Many mortgages, tenancies and leases require you to ask before running a business from the property. Planning permission is usually only needed if the business changes the character of your home, such as regular customer visits, staff, noise or major alterations. Council tenants need permission from the council.

Can I run a business from a rented home?

Usually, with your landlord’s written consent. Check your tenancy for clauses banning business use, then explain what you’ll do, how often anyone will visit and whether you’ll store stock. Low-impact work like online or desk-based services is commonly approved. Council and housing association tenants normally need to request permission formally.

Do I pay business rates if I work from home?

Not for normal home working in most cases. Rates may apply where a space is used only for business, customers visit, staff work there or the property has been altered for the business. If the rateable value is £15,000 or less, small business rate relief may reduce the bill.

What home costs can I claim as a sole trader?

You can use HMRC’s flat rate, worth £10, £18 or £26 a month depending on your business hours at home, or claim the business share of actual bills such as heating, electricity, council tax, and rent or mortgage interest. Business phone and broadband use is claimed separately.

Does home insurance cover my business?

Often not fully. Standard home policies may exclude business equipment, stock and visitors who come for business reasons, and not declaring business use could affect other claims. Tell your insurer what you do; they may add business cover. Consider public liability if people visit, and professional indemnity if you give advice.

Can I use my home address for my limited company?

Yes, but it will appear on the public register as the company’s registered office. Since March 2024, the registered office must be an “appropriate address” where documents reach someone. Many directors use an accountant’s or registered office service address instead, keeping their home address off the register and away from customers.

The bottom line

Starting a business from home is one of the cheapest, lowest-risk ways to find out whether an idea works. Most of the rules are about telling the right people and keeping sensible records: lender or landlord, insurer, council where needed, and HMRC. Get those in place in your first few weeks, avoid turning a room into business-only space without thinking it through, and your home can carry the business a long way.

If you’d like help working out what you can claim, or whether a sole trader or company set-up suits you better, the team at Eternity Accountants can help with self-employed tax and expenses.