Can I run a business from a rental property?

160 pts ?

From a tax and business law perspective there is no reason why you shouldn’t run a legal business from a rental property providing it doesn’t flout the law, e.g. you are not running an unlicensed gambling club or a bar selling alcohol; you’re not running a brothel, illegally copying media, breeding protected species, etc. from any property without legal right or a license to do so. 
Also it should be pointed out that if you run any business from anywhere you must also register with HMRC as a sole trader or have registered your limited company or partnership with Companies House. You need to pay tax on any income that has not already been taxed at source above the allowances, file by the deadline, and pay what you owe.
You don’t normally have to pay business rates on a business run from home, but there are certain circumstances where you might be required to do so, and you should make sure it doesn’t apply to you.

What? You’re running a business from my property!
From your landlord’s perspective, however, things may look very different if you want to run any business from a property that is being rented. First check your rental agreement or contract and make sure that there is nothing specific to say you can’t run a business from the rental property. Then, as a matter of courtesy if nothing else, check with your landlord, call, email, or write a letter about your intention to run a business from the property and stating what sort of business it is.
The chances are that your landlord will not object, but if s/he does object, then diplomatically you may want to point out that new regulations that came into force recently mean a landlord is not “unreasonably” allowed to withhold permission if a tenant asks to run a business from a rental property.
There are, however, some “reasonable” reasons why your landlord might not want you to run a business from the rental property: 

  • If you were about to open up a B&B or café business in the rental property, this could affect the landlord’s mortgage and buildings/contents insurance; it would change the premises potentially from a domestic to a commercial use;
  • If you were to use up too much floor space to run the business (over 40% then it is being used for commercial purposes) the property may be deemed commercial rather than residential and be in breach of the landlord’s mortgage agreement;
  • If your business will cause significant wear and tear to the property, such as if you were running a business with loads of customers calling at the property, i.e. a dog-grooming business, a dental or counselling practice;
  • If your business could cause parking problems, or disturbance to neighbours;
  • If your business was likely to increase utilities usage (say if the expense for utilities was paid as part of your rent); 

So, yes, you can run a business from a rental property providing it’s a legal sort of business and, to be on the safe side, you have your landlord’s say so. Then make sure you claim the expenses you’re allowed and that you accurately work out your profits on which you’ll pay tax. 
If you wish to learn more about Landlord Property Tax, then please get in touch with us.

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