Got a Home Business Plan? Here’s What To Do Next

There are an estimated 2.9 million home-based businesses in the UK, contributing around £300 billion to the economy each year. It's not a niche path anymore. For a lot of people it's a genuinely viable first step, whether they're testing an idea alongside a job, turning a skill into something commercial, or building something they plan to grow properly over time.

The appeal is obvious. No commute, lower overheads, and the ability to set your own hours. But running a business from home involves more than most people anticipate when they first start thinking about it. Getting the basics right early makes everything that follows considerably easier.

Key Takeaways

• You need to decide on a legal structure before you start trading. The two most common options for home businesses are sole trader and limited company, and they work very differently.
• If you're renting, you'll need your landlord's permission to run a business from the property. If you own your home, planning permission may be required depending on the nature of your business.
• Your home insurance almost certainly doesn't cover business activity or equipment. Check your policy and get appropriate cover in place before you start.
• If you take on an employee, employers' liability insurance becomes a legal requirement immediately.
• A separate business bank account keeps your personal and business finances clean from the start, which makes accounting considerably simpler.
• Sole traders must register with HMRC and complete a Self Assessment tax return each year. Limited companies must file annual accounts and a confirmation statement with Companies House.
• If your turnover goes above the VAT registration threshold, you're legally required to register for VAT. At the time of writing this threshold is £90,000, but it's worth checking the current figure on GOV.UK.
• Marketing doesn't need to be complicated early on, but having a clear idea of who your customers are before you spend money on reaching them saves a lot of wasted effort.

Sole Trader or Limited Company?

This is the first decision that actually matters, and it's worth thinking about properly rather than just going with whatever seems simplest.

Most people starting a home business choose one of two structures. As a sole trader, you register with HMRC, keep records of what comes in and goes out, and file a Self Assessment tax return once a year. It's quick to set up and straightforward to run. The catch is that you and the business are legally the same thing. If the business ends up in debt, that debt is yours personally.

A limited company takes more setting up and comes with ongoing obligations: annual accounts, a confirmation statement to Companies House, and generally a bit more admin throughout the year. What you get in return is a legal separation between you and the business. Your personal finances stay out of it if things go wrong. And once the business is generating decent money, there are usually tax advantages too. Directors can take a mix of salary and dividends rather than paying income tax on everything they earn.

The honest answer is that neither is automatically the right choice. It comes down to how much risk you're comfortable with, what your income is likely to look like, and how quickly you expect the business to grow. An accountant who deals with small businesses will have seen this question hundreds of times and can tell you fairly quickly which way the numbers point for your situation.

If a limited company turns out to be the right fit, you can register online through Companies MadeSimple.

Check What You're Actually Allowed to Do at Home

A lot of people skip this part entirely and then find out later they should have checked. It's worth five minutes of your time upfront.

Own your home? You don't automatically need planning permission just because you're running a business from it. The question is really whether the business changes what the property looks and feels like from the outside. A freelancer working from a spare room: almost certainly fine. Clients coming and going several times a day, a member of staff turning up every morning, regular deliveries arriving at the door: that's a different story. If your business falls into the grey area, a quick call to your local planning authority will tell you where you stand before you've committed to anything.

Renting? You need your landlord's permission before using the property for business purposes. Check your tenancy agreement first for any relevant clauses, then ask. Your landlord can't unreasonably refuse, but they can turn you down on certain grounds. If they say yes, get it in writing and ask for the tenancy agreement to be updated to reflect it.

In council housing? You'll need written permission from your local authority or housing association before you start.

One more thing that's easy to overlook: your home address. If you form a limited company, both your registered office address and your director's service address appear on the public Companies House register. That means your home address becomes publicly searchable by anyone. A registered office address service gives you a professional address to use instead, which keeps your home address off the record while still ticking the legal box. It's an easy fix and worth doing from the start rather than having to change it later.

Sort Out Your Finances Early

Running business income through a personal bank account is technically possible but creates a mess quickly. A separate business account keeps things clean from the start and makes tracking income, expenses, and tax obligations much more straightforward.

An accountant is worth bringing in early, even if the business is small. For a home business in particular, there are legitimate expenses you might not think to claim, including a proportion of your broadband, phone, and potentially heating and electricity if you work from a dedicated space. They can also make sure your returns are filed correctly, which matters more as the business grows. Check out an accounting platform, such as Xero, which may be useful to you.

Keep an eye on VAT from the start. Once your taxable turnover goes above the registration threshold (currently £90,000, worth verifying on GOV.UK as it can change), you're legally required to register with HMRC. Some businesses register voluntarily before that point to reclaim VAT on purchases. Whether that makes sense depends on your customers and your costs.

Insurance

Your home insurance almost certainly doesn't cover business activity or equipment. This is one of those things that doesn't matter until it does, and by then it's too late.

Check your current policy first, then speak to your insurer. You may need a business equipment add-on, a separate policy, or something more specific depending on what you're doing. If clients visit your home, public liability insurance is worth having. If you offer professional advice or services, look at professional indemnity too. And the moment you take on an employee, employers' liability insurance becomes a legal requirement rather than something to consider.

Getting Customers

Before spending anything on marketing, be clear about who you're actually trying to reach. Not vaguely, but specifically: what problem do they have, why would they choose you, and where do they spend their time? Getting that right first saves a lot of wasted effort later.

A basic website is worth having from day one. It doesn't need to be elaborate, but it should clearly explain what you do and how to get in touch. People who hear about you will often look you up before reaching out, and something half-finished can do more damage than nothing at all.

Where you focus beyond that depends on what you're selling. Visual or product-based businesses tend to do well on Instagram and TikTok. Service and B2B businesses usually get more from LinkedIn. If you're working locally, community groups, local directories, and word of mouth are often underestimated.

Pick one or two channels that genuinely make sense, put your energy there, and pay attention to what's actually bringing people in. Build from that rather than trying to be everywhere at once.

FAQs

Do I need to tell anyone I'm running a business from home?

It depends on your situation. If you rent, you need your landlord's permission. If you own your home, you may need planning permission depending on the nature of the business. You'll also need to notify your home insurer, as standard policies usually exclude business activity. And you'll need to register as either a sole trader with HMRC or form a limited company with Companies House.

Do I need planning permission to run a business from home?

Not automatically. The key test is whether the business changes the character of the property. Working quietly from a spare room generally doesn't require permission. Regular client visits, staff coming and going, or significant deliveries are more likely to need it. If you're unsure, check with your local planning authority before you start.

Should I use my home address as my business address?

You can, but both your registered office address and your director's service address appear on the public Companies House register. That means your home address would be visible to anyone who searches for your company. A registered office address service is an easy way to keep your home address private while still meeting the legal requirement.

What's the difference between a sole trader and a limited company for a home business?

As a sole trader, you and the business are one legal entity. Setup is simple, but any business debts are personal debts. A limited company is a separate legal entity, which protects your personal assets and can be more tax-efficient as profits grow. It comes with more compliance obligations, including filing annual accounts and a confirmation statement.

Do I need a business bank account?

There's no legal requirement for sole traders, but it's strongly recommended for both sole traders and limited company directors. Keeping business and personal finances separate makes accounting much cleaner and avoids complications at tax return time.

When do I need to register for VAT?

Once your taxable turnover exceeds the VAT registration threshold (currently £90,000, though this is worth verifying on GOV.UK as it can change), registration becomes a legal requirement. Some businesses register voluntarily before that point to reclaim VAT on purchases. Whether that makes sense depends on your customers and cost structure.

What insurance do I need for a home business?

At minimum, check that your home insurance covers business activity and equipment, as most standard policies don't. If clients visit your home, public liability insurance is recommended. Professional indemnity is worth considering if you offer advice or professional services. If you employ anyone, employers' liability insurance is a legal requirement.

How do I market a home business with a small budget?

Start with clarity on who your customers are and where they spend their time. A simple website establishes credibility. Social media works well for product-based businesses, while LinkedIn is more effective for service and B2B work. Local marketing, community groups, and word of mouth are often underestimated, particularly in the early stages.

This article is for general information only and does not constitute legal, tax, or financial advice. Rules and thresholds can change, and the right approach for your business will depend on your individual circumstances. It's worth checking current guidance on GOV.UK and speaking to a qualified professional before making key decisions.