Can I run a small business from a rental property?

As remote work and home-based businesses become more common, tenants and landlords must understand their rights and responsibilities. When running your own business, certain legal, financial, and contractual considerations apply.

Running a Business from a Rented Property

Running a business from a rented home involves more complexities than simply working remotely. Tenants must obtain landlord permission and consider additional legal, financial, and insurance matters.

As a tenant, you must formally request permission to run a business from home from the landlord.

The Small Business and Employment Act 2015 made it easier for landlords to approve home-based businesses, provided the business is “of a kind that might reasonably be carried on at home.”

What Types of Businesses Are Likely Acceptable?

Generally, businesses that do not alter the property’s residential nature or cause disruptions are more likely to be approved. These include:

• Creative industry businesses (writing, editing, graphic design, translation, consulting)
• Technology businesses (IT support, digital marketing, tutoring)
• Owner-managed businesses (electricians, plumbers, beauticians) who only use the home for administrative work.

Landlords may reasonably refuse permission to a business that:

• Changes the property’s appearance (e.g., signage, modifications)
• Generates excessive noise (e.g., music production, repair shops)
• Brings regular visitors (e.g., beauty salons, catering businesses with on-site sales)
• Involves hazardous materials or equipment

Financial and Legal Responsibilities

If your landlord permits a home business, you may need to:

• Renegotiate rent – If utilities are included in rent, the landlord may increase charges.
• Obtain business insurance – Home insurance may not cover business-related risks.
• Check for business rates – Some businesses may be liable for business rates in addition to council tax.
• Ensure compliance – The landlord’s permission applies only to the business specified in the agreement. Any change in business type requires fresh approval.

Landlord Considerations for Allowing Home Businesses

If you are a landlord, carefully assess a tenant’s request to ensure it complies with legal, financial, and practical considerations.

Key Factors to Review Before Granting Permission

1. Mortgage Terms – Some mortgage agreements prohibit non-residential use. Check with your lender to avoid contract breaches.
2. Local Planning Laws – Contact your local council to confirm that the proposed business does not violate zoning regulations.
3. Insurance & Liability Risks – If the business involves customers or suppliers visiting the property, you may be held liable for accidents or damages.
4. Property Wear and Tear – If the business involves heavy equipment, frequent deliveries, or commercial storage, consider the long-term impact on the property.

Information Landlords Should Request from Tenants

To make an informed decision, request a detailed business proposal covering:

• Nature of the business (industry, services provided)
• Space requirements (percentage of home used for business)
• Utility demands (electricity, water, broadband usage)
• Insurance details (proof of business insurance)
• Equipment & storage needs (potential fire hazards, weight limits)
• Business hours (expected working schedule)
• Visitor frequency (customer or supplier visits, parking requirements)
• Delivery schedules (impact on property access)

Formalising the Agreement

Once you approve the request, update the tenancy agreement or create an additional agreement outlining business use conditions. This document should clarify:

• Permitted business activities
• Utility cost adjustments (if applicable)
• Restrictions on property modifications
• Inspection frequency
• Insurance and liability requirements

For legal protection, consider consulting a solicitor to draft or review the agreement.

Claiming Tax-Deductible Expenses for Home-Based Work

If you run a business from home, you may be eligible to claim certain expenses against your income tax liability.

General Rule for Allowable Expenses

HMRC allows you to claim costs that are “wholly, necessarily, and exclusively” for business purposes. However, if an expense serves both personal and business functions (e.g., heating, broadband), costs must be apportioned accordingly.

Common Tax-Deductible Home Expenses

• Rent or mortgage interest (proportional use for business)
• Electricity, water, and heating costs
• Broadband and telephone bills (business-use percentage)
• Home and business insurance
• Repairs and maintenance for business-use rooms
• Cleaning and decorating business areas
• Office equipment & furniture (capital allowances apply)

How to Apportion Costs

If you use one out of five rooms exclusively for business, you may claim 20% of applicable expenses. Keep invoices and records for all claimed expenses.

Need Professional Advice?

This guide provides an overview of running a business in a rented property. However, each situation is unique.

If you require expert legal or financial guidance, our team of experienced small business accountants is here to assist. We can help with tax planning, compliance, and business setup.

Contact us today for tailored support and professional advice.