Hints and Tips



Home-based business

While it’s definitely cheaper to run your business from home, there are still plenty of financial matters for you to sort out.

Follow this ten-point plan before you get started:

1. Check with your mortgage lender: Most mortgage lenders won’t object to you running your business from your home as long as it’s still mainly residential; but you should let them know. If you’ve only got a computer and phone in your spare room, it’s unlikely to affect your mortgage, but if you convert your home into a workshop, your loan may be switched from a residential to a commercial one.

2. Capital gains tax: Under current tax laws, you don’t pay capital gains tax when you sell your home. But using it for business could result in a capital gains tax bill when you sell. It all hinges on the definition of ‘incidental’ use, so consult your tax office. If you’re already offsetting expenses from using your home for business against your tax bill, you don’t need to tell them separately.

3. Need a loan?: Whatever your business, you’ll probably need some capital to get started, and that could mean a bank loan. Not all the major banks offer business loans for small amounts (around £5,000), so you may find your choice limited. If you want to raise a larger amount of money, be careful about using your home as security. This is especially important if you’re in the early stages of your business and you don’t have many customers. You could lose your home as well as your business.

4. Overdraft and banking: An overdraft is useful for the short term, as it’s quite flexible and you can pay it off at any time. However, you shouldn’t rely on it for long-term financing, as your bank can cancel it when it wants to. Never resort to an expensive unauthorised overdraft. If you want to open a business bank account, you’ll probably have to pay for your transactions (unlike most personal accounts). Most banks will give you several months’ initial free banking.

5. Insurance: Ordinary home contents insurance will not normally cover faxes or computers for business use. That doesn’t mean you’ll have to switch insurer, some will add on a ‘business use’ clause, either free of charge or for a small premium. For more expensive specialist equipment, consult a specialist broker.

6. Tax: Part of running your own business or working as a freelance will involve sorting out your tax. That means filling in a self-assessment tax form. It’s up to you to let the tax office know if you have untaxed earnings, and there could be heavy fines if you don’t. You don’t need an accountant simply because you’re self-employed, but if your affairs are complex you may be well advised to use one. Don’t forget to keep all your receipts.

7. Planning permission: Broadly speaking, if you need to alter the structure of your home to run your business, you will need planning permission. If, on the other hand, you use your spare room as an office, but can still use it as a spare room if necessary, you won’t have ‘materially changed’ its use, so planning permission shouldn’t be necessary. The catch is that the definition of material change of use is open to interpretation by local authorities. If you’re in doubt, it’s wise to contact a planning consultant.

8. Renting your home: If you rent your home, check that your landlord won’t object to you working from home. If your business will cause no disruption to either the house or your neighbours, your landlord should have little to complain about.

9. Property deeds / lease: If you own your home, the property deeds may have a paragraph relating to business use, especially if you live on a large estate. Developers often include a clause in the deeds banning business use to make sure that the area remains residential. If it’s leasehold, check that the lease doesn’t have any restrictions.

10. Get support: If you’re about to start working from home, make sure you don’t isolate yourself. From time to time you’ll need someone to call on. It could be a friend, someone who’s in a similar line of business, or your spouse / partner.

To read the full article: http://www.dailymail.co.uk/femail/article-8898/Home-based-business.html#ixzz2dWg6xgwc

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