How to start a business from home: Step-by-step UK guide

Published Monday 5 January 2026

Table of contents

• What kind of business can you start doing at home?
• Benefits and considerations of starting a home business
• Legal requirements for home-based businesses
• How to start your own business from home: a step-by-step guide
• Insurance and protection for home businesses
• Health and safety requirements
• Business rates and tax considerations
• How to start an online business from home
• Overcoming possible barriers to setting up a home business
• Making your home business succeed with the right tools
• FAQs on starting a business from home

Key takeaways

• Verify legal compliance requirements including zoning regulations, landlord permissions, and council rules before starting operations to avoid potential legal issues.
• Establish dedicated business systems including a separate bank account, proper accounting software, and organized record-keeping to maintain clear financial boundaries between personal and business finances.
• Create a comprehensive business plan and financial strategy that includes realistic revenue targets, break-even analysis, and cash flow projections to guide your business toward profitability.
• Set up a professional home workspace with adequate space, minimal distractions, and appropriate equipment while obtaining necessary business insurance to protect against liability claims.

What kind of business can you start doing at home?

A home-based business is any business where your own home is the principal place of business. Over two-thirds of new businesses start from home, making it the most popular way to launch a venture.

Popular home business types include:

• Creative services: copywriting, content writing, graphic design
• IT services: web design, app development, technical consulting
• Ecommerce: handmade products, drop shipping, online marketplaces like Etsy

Whether you're seeking a side hustle, full-time income or entrepreneurial venture, home businesses offer flexible options for every goal.

Legal compliance is essential before starting any home business. Check these requirements in your area:

• Zoning regulations: verify your location permits business operations
• Safety laws: understand requirements if customers visit your home
• Liability insurance: protect yourself from potential legal claims

Benefits and considerations of starting a home business

Running a business from home can be a great way to get started, offering more flexibility and lower costs. But it's wise to weigh up the pros and cons before you begin.

Key benefits often include:

• Lower startup costs: With no need to rent an office, you can reduce your overheads significantly.
• Work-life balance: You can create a schedule that fits around your family and personal life.
• Less commuting: Save time and money by cutting out the daily commute.

You should also plan for a few common challenges:

• Isolation: Working alone can sometimes feel lonely.
• Work-life blur: It can be hard to switch off when your office is always at home.
• Distractions: Home life can interrupt your workflow if you don't set clear boundaries.

Legal requirements for home-based businesses

Before you start, check you have the right permissions in place. You may need to check a few things to operate legally from your home:

• Permissions: If you rent, you'll need your landlord's permission. If you own your home, check your mortgage terms to see if you need to inform your lender.
• Council rules: You don't usually need permission from your council for minor business use. However, if your business involves lots of visitors or deliveries, or is noisy, you may need to get in touch with them.

How to start your own business from home: a step-by-step guide

Follow these 8 steps to get started with a home business.

1. Develop your business idea

Business idea development starts with matching your skills to market opportunities. If you don't have obvious ideas, use these approaches:

Match your existing skills:

• Professional experience: Leverage years of expertise in your field
• Natural talents: Turn hobbies into profitable services
• Qualifications: Monetise certifications or training you already have

For example, strong baking skills could become a home bakery business specialising in custom cookies or cakes.

Choose viable and passionate ideas:

• Passion test: Select ideas that genuinely excite you for sustained energy and focus
• Viability check: Ensure your skill can generate actual revenue streams
• Market research: Study your competition and identify customer demand

You can begin by researching the market and your potential competition.

Consider if you can run your idea from home

You'll need to think about zoning laws. For example, if you want to run a catering business, you may not be allowed to, but you may be able to run a home baking business. Home bakeries are cottage industries and are permitted to make low-risk foods; catering businesses can produce high-risk foods and require more regulation and facilities that may not be allowed in a residential area.

When you brainstorm, capture every idea, whether it’s bold or simple.

Once you’re confident you can commit your energy and earn a return from your idea, move on to the next step.

2. Write a business plan

A business plan describes your product, target customers, and path to profitability. Even a short plan significantly improves your chances of success.

Start with a one-page plan:

• Focus benefit: Keeps you concentrated on essential elements
• Completion benefit: Short format ensures you'll actually finish it
• Core elements: Product description, target market, revenue model

Your business plan should address these key areas:

• Product-market fit: How your offering meets customer needs
• Financial requirements: Startup costs and ongoing funding needs
• Revenue targets: Realistic sales goals and timelines
• Marketing strategy: How you'll reach and attract customers
• Team structure: Key roles and responsibilities needed

Download a one-page business plan template.

3. Create a financial plan

A financial plan shows how your business will generate profit and manage cash flow. Most home businesses aren't immediately profitable, so plan for a lean start.

Essential financial planning components:

• Budgeting: Estimate costs and income to predict profitability timing
• Cash flow: Identify when you might need additional funding
• Break-even analysis: Calculate when revenue will cover all expenses

Learn about small business budgeting.

Pricing

Pricing strategy balances customer affordability with business profitability. Research competitor prices and calculate your true costs to find the optimal price point that attracts customers while ensuring sustainable margins.

Get the scoop on common pricing strategies.

Financing

How will you pay for everything? Do you need a loan (or investment) to start up your business?

Find out how small business finance really works.

How to pay yourself

Work out what you can afford to pay yourself. And learn how to do it without getting a surprise tax bill. Quick reality check: most small business owners only take modest pay to begin with.

Figure out how to pay yourself.

4. Decide on a name, business entity and legal structure

Business naming creates your professional identity and clarifies what you offer. Choose a memorable name that clearly communicates your services.

Name availability verification steps:

• Google search: Check if the name is already in use online
• Intellectual property search: Verify trademark availability through official databases
• Domain check: Ensure website address availability

There are several different ways to make your business name official:

• Trading name: This allows you to trade with a name other than your own. This doesn't give you legal protection, but can help distinguish different areas of your business if you want to sell certain products or services under a separate name.
• Trade mark: This protects your business name, goods and services at the national level.
• Domain name: This protects your business web address.

You'll also need to choose a suitable business structure. This can affect how you're taxed and how much you're personally liable for the business.

There are four main types of business structure to consider:

• Sole trader
• Partnership
• Limited liability partnership: This structure has no limit on the number of partners, but at least 2 must be 'designated members' responsible for filing annual accounts.
• Limited company

The government will automatically assume you're a sole trader unless you choose to be something else. To choose the correct entity for your business, consult with an accountant.

Learn more about types of business structures and registering a business.

5. Set up the business licence and bank account

Tax registration establishes your business legally with HMRC for tax purposes.

Required registrations:

• UTR number: Unique tax reference that identifies your business with HMRC
• Individual vs business UTR: You may need separate numbers depending on your business structure
• VAT registration: Required if your annual turnover exceeds the government threshold, which is currently £90,000

You may also have to apply for VAT registration with HMRC.

After you have completed your business and tax registrations, you may need to apply for a business licence depending on your industry. Local authorities generally issue these licences.

Some common licences include:

• Home occupation licence: If you're planning to get lots of customers or deliveries or advertise outside your home you may need to get permission with your local council.
• Alcohol licences: You'll need to check what local licences apply to you if you're planning to sell or supply alcohol. It's likely you'll require a premise based and personal licence.
• Food business registration: If you're planning to prepare and sell food you'll have to register for this licence for each of your outlets, with the corresponding local authority.

It's a good idea to review your home-based business insurance needs. Typical insurance includes home cover, public liability, professional indemnity, and key person or shareholder protection.

Learn more in the VAT guide for business.

6. Set up your home office

Home office setup creates a dedicated workspace that maximises productivity and professionalism.

Workspace requirements:

• Dedicated area: Designate a specific room or area exclusively for business
• Adequate space: Ensure room for equipment, inventory, and comfortable movement
• Distraction-free environment: Choose quiet locations away from household interruptions
• Professional appearance: Consider client-facing needs if you'll host video calls

Once you have your space, invest in suitable furniture, tools and technology. You may not be able to afford everything you'd like all at once, so rank things in order of priority.

For more suggestions, check out these practical tips for a mobile office.

7. Set up small business accounting

Small business accounting separates business and personal finances while tracking all transactions for tax and performance purposes.

Essential accounting steps:

• Dedicated business bank account: Prevents confusion between personal and business finances
• Receipt recording: Document all business purchases for potential tax deductions
• Sales tracking: Maintain records of all income sources
• Centralised records: Consolidate all financial data in one system for easy monitoring

Get a tax advisor on board as soon as you can. They will help you claim all the deductions you're entitled to and submit an accurate return, plus they'll do things like estimate your tax bills so there aren't any nasty surprises.

Here's an intro to small business accounting.

8. Create a marketing plan

A marketing plan defines your strategy for reaching customers and promoting your business effectively.

Marketing plan development steps:

• Market analysis: Conduct SWOT analysis to understand your competitive position.
• Target audience: Identify who your ideal customers are and where to find them.
• Channel selection: Choose the most effective ways to reach your audience.
• Budget allocation: Determine how much to spend on each marketing activity.

Set your goals and objectives

Make them SMART (specific, measurable, achievable, relevant, time-bound).

Outline your marketing strategies

Choose marketing activities to suit your target audience. For example, will you reach them online?

Set your marketing budget

Knowing how much you have to spend is critical to the success of any marketing campaign.

Keep your marketing plan up to date

Analyse your campaigns and tweak or change your plan as needed. Track how much business you get in return for each pound spent. When you see something isn't working, invest your money and energy in other ideas.

Useful marketing tools for home-based businesses include:

• a simple website
• social media accounts
• email marketing tools

Insurance and protection for home businesses

Your standard home insurance policy is unlikely to cover business-related activities. It's important to get the right cover to protect you, your customers, and your equipment.

• Public liability insurance: This covers you if a client or member of the public is injured because of your business.
• Professional indemnity insurance: This is important if you provide advice or professional services, protecting you against claims of negligence.
• Business equipment insurance: This covers your work computer, tools, and other essential equipment against theft or damage.

Health and safety requirements

As a business owner, you have a legal responsibility to manage health and safety. This applies even if you work alone from home. You need to consider the risks to yourself, any employees, and any visitors to your home for business purposes. This includes ensuring your workspace and any equipment you use are safe.

Business rates and tax considerations

Most home-based businesses don't have to pay business rates. This is usually the case if you just use a small part of your home for your work, like a desk in a spare room. However, you might have to pay business rates if you sell goods or services to people who visit your property, or if you've converted part of your home specifically for your business.

You can also claim a proportion of your household costs, like heating and electricity, as allowable expenses on your tax return. Keeping good records makes this much easier.

How to start an online business from home

Starting an online business is easier than ever. Online businesses generally cost less to run and work well as a side hustle. Plus, online businesses give you the flexibility to work from anywhere and access to a worldwide market.

Learn the pros, cons and how-to's in the guide to starting an online business.

Overcoming possible barriers to setting up a home business

Common business barriers affect most new entrepreneurs, but proper planning and resilience help overcome these challenges.

Typical barriers and solutions:

• Limited finances: Ensure adequate startup capital through savings, loans, or partnerships
• Regulatory complexity: Consult experts to understand licensing and permit requirements
• Work-life boundaries: Establish clear business hours and dedicated workspace
• Isolation: Join professional networks and consider co-working arrangements

Making your home business succeed with the right tools

Running your business efficiently is key to success. The right technology can save you time on admin, so you can focus on what you do best. Consider using tools for:

• Accounting: Cloud accounting software helps you track income and expenses, send invoices, and see your financial position in real time.
• Communication: Tools for video calls and team messaging keep you connected with clients and collaborators.
• Project management: Apps can help you organise tasks, track deadlines, and manage your workload effectively.

Automating routine tasks with Xero gives you more time to grow your business and maintain a healthy work-life balance. Try Xero for free.

FAQs on starting a business from home

Here are answers to some common questions about starting a business from home.

Which business is best to start from home?

The best business for you will depend on your skills, passions, and market demand. Think about what you're good at and enjoy doing. Researching your idea will help you see if there are customers willing to pay for your product or service.

Do I need a separate bank account for a home business?

It's highly recommended for all business types, as it makes your bookkeeping much simpler. If you set up as a limited company, you are legally required to have a separate business bank account.

How much does it cost to start a business from home?

The cost can vary greatly. A service-based business, like a writer or consultant, might only need a laptop and an internet connection. A business that makes and sells products will have costs for materials, stock, and potentially storage. Creating a budget is a vital first step to understand your startup costs.