Are you allowed to run your limited company from home?

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

For many consultants and contractors, the home doubles up as the company’s registered office and main place of work. But before you dive in, there are some practical and legal checks worth making.

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 restrictive covenants prohibit certain uses of your property, including a ban on business use.

The title to the property (see the Land Registry site) should list any restrictions.

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

Bear in mind that more people than ever run small businesses from home without encountering issues. This is especially true if you are operating a low impact venture such as IT contracting, freelancing, or selling online. 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.

If the neighbours complain and the nuisance hinders their enjoyment of their property, you could face legal action. If you are setting up a business that might generate occasional visitors or deliveries, it is 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 prohibit you from using the property as a business premise. Doing so without notifying them could be considered a breach of contract.

That said, most home based contractors will not raise red flags with mortgage providers, as long as you are not making major changes to the property or generating substantial foot traffic. For peace of mind, double check with your lender.

Planning permission

If you intend to make structural changes to your home or there is likely to be a material change to the property caused by the nature of your business, you should consult your local authority first.

Depending on your business type, you may also need to apply for a licence. Businesses that need a licence include child care, 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 could affect the rate of council tax you have to pay, as business rates may be liable for the part of the home you use for business purposes. Check with your local authority first.

In practice, this typically only applies if you use a significant portion of your home for business purposes or make major alterations such as converting a whole room into a shop or office. For small scale contractors working from a desk or spare room, the impact is usually minimal. See our guide to use of home as office expenses for more detail.

Rented or leased property

Check the terms of your lease or rental contract. If there are no restrictions, you must get your landlord’s permission before operating a business from the property. If the landlord consents, make sure you get a new agreement drawn up and signed.

A landlord can refuse permission if they think the nature of your business will cause extra wear and tear to their property or that the business operation will be a nuisance to the neighbours. They can also refuse if they think the lease should be changed from residential to commercial, but they cannot withhold their consent unreasonably.

That said, to prove the landlord’s refusal is unreasonable, you may have to 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 sign a new agreement.

The council can refuse permission if it thinks the business will be a nuisance to neighbours or cause excessive wear and tear to the property. Running a business from your council home could also affect your council tax and any benefits you receive.

Running a business from your garage or shed

If you are setting up an office in your garage, for example, and do not make a material change to the building or cause a nuisance to your neighbours, 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.

Even small changes, such as adding a sign outside your property, might require permission, so it is better to check with your council.

What about insurance?

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

You may have to seek your provider’s consent before going ahead and have a new policy reflecting the change drawn up and signed.

If you employ staff or the public has access to the property, you should also consider taking out public liability insurance.

Other policies, such as professional indemnity cover and income protection, may also be relevant depending on your work.

See the GOV.UK website for more information on running a business from home.