Planning for additional financial costs when setting up a home office

Managing cashflow is hard when you work at home. Learn to plan ahead

Cashflow is one of the hardest elements for any new business to manage. Just when you think you have your finances shipshape another brown envelope lands on the mat. And when you work at home the endless succession of bills can be extremely depressing. It can seem that you are doing nothing but working to service other people’s accounts.

If you work from home it is extremely easy to feel isolated and being able to afford “treats” is one of the major justifications for getting on with work. So good planning is vital right from the start. If you can factor in all the niggling little costs from the start, then you have a much better chance of making a profit and not becoming depressed at the endless drain on your resources.

We all know we face a tax bill at the end of every year. We also know that we will be paying national insurance and accountancy fees. We know there will be other costs associated with insurance and buying the required equipment but what else is there to pay?

Business Rates

Many a small business has closed after facing a hefty hike in the business rate. Shopkeepers in town centres often quote the business rate as the final nail in the coffin as they face competition from out of town centres where the rates are much lower.

Take a look at your next rates bill – the split between business and residential income is usually pretty much on a par with businesses paying a huge chunk of money to operate where they do.

But when you work at home, does this matter? The key is in talking to your local council. rating officers say that in 99 cases out of 100 of homeworkers, business rates will not apply but there are exceptions.

If you have a desk in the corner of your dining room and work alone, you will not have to worry. If, however, you have people coming to the house on a regular basis then you may be business rated. Other instances include those using a garage specifically for business, those who put a sign up outside, or those who have a dedicated space within the house for work.

That sounds like a lot of us but if the space is not wholly commercial, then it can not attract business rates. For example, if you use your garage as an office but also store your household tools there or a lawnmower in the corner. Or if you have an office at home but it also houses the main household telephone and other people use it as living space.

On this basis, not many businesses from home are rated. But for those that might be, the district council or borough council would refer any case to the inland revenue valuation office which then sets the ratable value.

Planning permission

As with business rates, planning officers say there are no hard and fast rules. The key, again, is in discussion. A lot of people report, anonymously, suspected wrong doings and at least if you have already had discussions with your office then there will be no heavy-handed investigation. This may well prove fruitless but would waste time and add unnecessary stress to your life.

Planning officers say it is all down to a case of material change in use and this is open to interpretation. If an individual uses a study or third bedroom, working from home then there is no problem.

But if they employ anybody or use a larger portion of the house, then they need to have a chat. Officers stress that this does not necessarily mean you will need permission but you would be wise to have a chat.

The classic example that planning officers are taught at college is that planning inspectors work from home – they use one room as an office and this is deemed acceptable. The classic example of those who have to think more carfeully are the likes of hairdressers or chiropractors who potentially would need permission.

Whether you need planning permission is determined by whether it is a material change of use, whether you get permission is determined by levels of activity and the type of use.

If you attract a lot of people to your neighbourhood and they take up parking that your neighbours would otherwise use, you may well need permission. Equally if you are likely to generate a lot of noise, dust or smells, then permission may be needed.

You may think that by converting a garage or outbuilding that you would automatically need permission but this is not necessarily so. If the building is not listed or does not have other convenanted restirctions and if it is for the “incidental enjoyment” of the house, then you will not need permission in normal circumstances.

But again, if you are employing anybody or bringing visitors to the property, check with your local planning office.

If you can factor in all the niggling little costs from the start, then you have a much better chance of making a profit and not becoming depressed at the endless drain on your resources.


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