Most people running a small, quiet business from a spare room need no formal planning permission, but GOV.UK guidance says you may need permission from your mortgage lender or landlord, and from the council if you expect lots of customers or deliveries, want outside advertising or need a licence. You should also tell your home insurer, and check whether part of the home becomes liable for business rates.

Do you need planning permission?

In England and Wales, section 57 of the Town and Country Planning Act 1990 requires planning permission for any “development”, and section 55 defines development as building or other operations or the making of any material change in the use of buildings. Working at a laptop in a bedroom does not normally change the use of a house in any material way. The question is whether the business changes the character of the property so that it is no longer simply a home.

GOV.UK’s guidance on running a business from home points to the situations where you may need permission from the local planning authority or the council: making major alterations to your home, expecting lots of customers or deliveries, wanting to advertise outside the property, or running a business that needs a licence. Signs that usually trigger questions include a stream of visiting clients, staff arriving each day, vans parked outside, noise or smells, and a garage or outbuilding converted into a workshop or treatment room. If in doubt, ask the council before you spend money on alterations.

Limited companies have one helpful exception. The rule that a company must display a sign with its name wherever it operates does not apply to a home address, according to GOV.UK guidance on running a limited company.

Does your mortgage lender need to know?

GOV.UK lists the mortgage provider as one of the parties whose permission you may need. Read the mortgage offer and conditions for anything about business use or alterations. If the business involves building work, visitors or a separate entrance, write to the lender before you start, describe what you plan, and keep the reply with your property papers. A written answer is far easier to rely on later than a phone call.

What if you rent, or own a leasehold flat?

Tenants should check the tenancy agreement for any clause about how the property may be used, and ask the landlord for written consent; GOV.UK lists the landlord alongside the lender as someone whose permission you may need. Leaseholders should check the lease in the same way and, if it restricts use, ask the freeholder or management company before starting.

Freehold owners are not entirely free either. HM Land Registry’s guide to reading a title register explains that the charges register shows rights and interests that limit how the property can be used, such as restrictive covenants. Read the charges register and any documents it refers to before committing to a business that brings visitors to the door.

Will you have to pay business rates?

GOV.UK guidance on business rates says you do not usually pay them for a home based business if you use a small part of the home, for example a bedroom as an office, or sell goods by post. You may need to pay business rates as well as Council Tax if:

  • the property is part business and part domestic, for example living above your shop;
  • you sell goods or services to people who visit your property;
  • you employ other people to work at your property;
  • you have made changes to your home for the business, for example converting a garage into a hairdresser’s.

Whether rates apply depends on whether the Valuation Office Agency (the local assessor in Scotland) gives part of the home a rateable value. Council Tax remains payable on the rest of the property. In England, small business rate relief means no business rates are payable on a property with a rateable value of £12,000 or less if it is the only property the business uses, with relief tapering away between £12,001 and £15,000.

What insurance points arise?

GOV.UK warns that home insurance may not cover your business, such as stock, computers or customers visiting the premises. When you buy or renew a household policy you are under a duty, set by section 2 of the Consumer Insurance (Disclosure and Representations) Act 2012, to take reasonable care not to make a misrepresentation to the insurer, and the questions about business use are where home workers most often go wrong. See answering home insurance questions.

If you employ anyone, including at your home, employers’ liability insurance of at least £5 million is compulsory unless an exemption applies, and GOV.UK says you can be fined £2,500 for every day you are not properly insured. The details are in employers’ liability insurance requirements.

What tax points come with a home base?

Sole traders and partners can claim a proportion of costs such as Council Tax, heating, lighting, phone calls and broadband, or use HMRC’s flat rate simplified expenses instead. The methods are compared in working from home expenses and simplified expenses. GOV.UK also notes that you may have to pay Capital Gains Tax on the part of the property used for business when you sell; the effect on private residence relief is covered in using part of your home for business.

What other rules still apply at home?

  • Health and safety. GOV.UK says you need to manage health and safety as you would in any other business, which includes visitors and any staff.
  • Data protection fee. ICO guidance says that if you hold personal information for business purposes on any electronic device you may need to pay an annual fee, and failing to renew can lead to a monetary penalty of up to £4,000 on top of the fee.
  • Licences. GOV.UK lists needing a licence to run your business as one reason to contact the local council, so check before trading rather than assuming home working is exempt.
  • Business name. A sole trader must show their own name and any business name on official paperwork such as invoices and letters.

How do two home businesses compare?

Illustration only. Alex is a bookkeeper working alone from a spare bedroom, with clients contacted by email and video call. There are no alterations, no visitors and no staff. Alex is unlikely to need planning permission or to pay business rates, but should still check the mortgage terms, tell the home insurer about the equipment and business use, and pay the ICO fee if it applies.

Jo is a beauty therapist who converts the garage into a treatment room with its own entrance and sees eight clients a day. Jo should speak to the council about planning and any licence before building work starts, expect the Valuation Office Agency to consider a rateable value for the converted garage, get the lender’s written consent, and arrange cover for clients visiting the premises, because a standard home policy may not provide it.

What mistakes come up most often?

  • Converting a garage or outbuilding before checking planning, rates and the title.
  • Assuming the home insurer knows about the business because the policy was bought online.
  • Not reading the lease or tenancy agreement for restrictions on use.
  • Claiming a large share of household costs while telling the insurer and lender that there is no business use.
  • Forgetting that taking on even one employee brings employers’ liability insurance and health and safety duties into the home.

Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant’s fees with Solar Protect. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.