Working from home
When I first started a tax consultancy I worked from home. Indeed home was our base for the first 18 months – that crucial time when set-up costs are high and business levels are low. The mortgage needed paid anyway so ongoing costs were modest.
So today I am going to talk about some of the issues about working from home.
For many businesses working from home is an excellent way to start off while keeping your overheads down. For only a small increase in heating and phone bills you may be able to run a part-time or full-time business without the expense of premises.
As a rule of thumb I tend to think that even modest premises cost in excess of £12,000 per year by the time you count rent, insurance, cleaning and staffing. Home costs a lot less.
Taking on premises can mean committing yourself to a lease for a number of years – which would be yet another problem should the business not thrive. Also the premises you can afford when starting up may not be big enough come 3 years down the line.
Of course not all businesses can legally be operated working from home. Abattoirs, metal foundries and chemical plants will require licences and planning permission. However running a small consultancy is unlikely to land you in hot water. Lots of callers to the house may also cause problems, as it will annoy the neighbours.
If 25% of your home is used for the business then it is legitimate to claim tax relief of 25% of the household light and heat. Possibly even some mortgage interest.
Insurance is something you want to get right. So long as there are not many callers coming to your house each day then your home insurance may cover you. However you must inform your insurance company and I recommend you do that in writing.
Professional insurance is becoming more and more of an issue in business as people become fonder of taking legal action. Regardless of where your business operates from you should consider insurance so that if something goes wrong and a client sues you then you have some protection. Better than risking all that you own.
Privacy is anther issue about setting up from home. There are many advantages to a home base, but some disadvantages. One of these is that clients will have your home address. That means they may feel at liberty to call with you at any time. So your day off lying in the back garden may be interrupted!
A related issue is telephones. Once you work from home you run the risk of being disturbed 24/7. If your phone number is in the book then you could convert it to a business line and take a fresh number which is ex-directory. This latter number goes to family and friends. The old (published) number then can have an answer machine to take calls out of hours and on holidays. That’s how I worked it.
Children or others sharing the house need to be considered when working from home. A new client may not want to come into a hall where they have to pick their way through dozens of toys and listen to a screaming child during your whole meeting. Or they may be put off by – or allergic to – your pets – not everybody is an animal-lover. Perhaps making a separate door into your office may make sense. If you have elderly relatives with you then you need to think about whether it is fair to have clients calling all the time. This may stress Granny, especially if people call when you are out.
One of the biggest advantages of working from home is that clients will not assume you are always there 9-5 Monday to Friday. Once you spend the money on an office then you will be expected to keep it open. This may mean staffing costs to cover time when you are out at meetings or on holiday.
There are a lot off issues about working from home, but on the whole I recommend it for at least the early years of a new business. After that, if you are still in business, then you can consider the future.
If you are working from home you can claim tax relief on the business element of your household running costs – say 25% of heating and lighting costs, depending on the space taken up. Check out this article on Working from home.