Want to move business into home

Toon

I hope this is the fight place for this. I currently have a house worth about £70-75k with an outstanding mortgage of around £50k with about 16 years left. I pay just under £400 a month. I currently rent a factory unit for my business and pay just under £400 a month rent along with about £70 rates. I am thinking about just moving into a bigger house where I can store my stock and work from home.

At the moment I spend at home £400 on the mortgage, £90 on council tax, £30 on elec, £30 on gas, £20 on water, £20 on phone, £30 on insurance. Thats about £620 a month. At my unit i spend £400 on rent, £70 on rates (but it's currently half price and may go up in the future), £50 on elec, £15 on water, £30 on phone, £25 on credit card machine, £40 in insurance. Thats about £630 a month.

If I worked from home a lot of these bills would be shared and I would save money. In theory I'd like to put £400 a month from the mortgage along with £400 a month for the rent and find a bigger house where I pay £800. I'd still be saving the £70 rates, about £40 on elec, £15 on water, £15 on phone, £25 on cc machine (I no longer need this anyway) and £30 on insurance. So I;m guessing in total it would save me over £200 per month taking into account I wouldnt have to spend money on petrol going to the unit every day. This also means the money goes towards buying a house instead of renting some place. Even if I put another £100 or 2 into the mortgage to get a better house then it means I wont be saving anything but I'd have a nicer house

What do you think? Are there any flaws in my plan?

dunstonh

You would no longer be eilgible for normal home insurance but require business insurance. That would probably wipe out your insurance saving.

Depending on your business, you may need to get planning permission and could end up paying business rates depending on the scale of the business. Some estates may have restrictions on what is and isnt allowed (for example, on our housing estate, you are not allowed to park any vans overnight).

What sort of "work from home" is it?

Ian_W

Not so much flaws in the plan as things to consider that you haven't mentioned but may have already thought about.

Some properties, particularly more modern ones may come with a covenant preventing them being used for anything other than a residential home. Not usually a problem for someone to work from home if it's an office based type of work but may be more difficult if it's the type of work that's usually done in an industrial type unit. Also you may need to check with the local authority whether it raises any planning issues, ie change of use for part of the house.

Tax. If you use part of your home for work you may well be able to claim some of the running costs, pro rata, as allowable expenses for income tax. However there may also be a possibility that Capital Gains Tax could be due. Your home is normally exempt but if a substantial part of it is used for business and running expenses claimed there is the possibility that some of it could liable. I would run those past your accountant before deciding.

If you're looking to raise a mortgage I couldn't advise but I think you may need to post details of own & partners [if there is one] earnings, any debts and the price of the property you'd be looking to move into and whether you'd be looking to put all the £20/25K equity in your current property into the new one. I would imagine that it is possible to buy with a residential mortgage rather than a commercial one but I'm sure one of our helpful brokers who post will answer that if you post details of how much you need.

Otherwise it does look better if you can find a suitable property to work from home.

HTH.

Toon

I understand domestic insurance would never cover everything so I know that I wouldn't save all of the insurance costs but thought it might come down a little.

The business I run is to do with clothing. I operate a number of clothing websites and therefore need space to store the products as well as pick/pack and send out orders. I may have the occassional trade customer visiting and regular deliveries. I know you will probably say something about neighbours complaining about the deliveries but hopefully this wouldn't be the case as it'll just be a royal mail or dhl van visiting once a day on average and i would find a property with a big enough drive so as not to block the road.

i will be seeing my account next week so will run this by him then.

I'm not sure what value the house would be but I thought if should be able to get something worth around £150k if i put £800-900 a month in. I would be happy to put the full amount of equity in.

iian

We are doing the same as you. As said above I doubt if you'll save much on the insurance.

We looked into it quite a bit and the overiding theme that kept coming back to us was to keep the neighbours happy! If you keep the neighbours on side, they wont complain to the council and the council wont be too worried about you. Its worth having an informal chat with your local planning office, they were very helpful (and gave the above advice).

One thing to make sure of is to not use a room exclusivly for the business as this will mean you will have to pay rates and would mean having to pay Capital Gains Tax, I'm sure your accountant will help.

One more point to consider is the perception of working from home, we are using a mailbox at our local business centre and are keeping 2 phone lines one just for business and one for home.

How well do you know the reps, if you have a good relationship I think its fine for them to come to yous but if you dont know them I'd say hire a small meeting room or arrange to meet in a nice hotel near you for coffee.

Hope thats of some help.

Ian

Toon

I've recently found out that my lease says I have to stay here for 3 years - thats another 2 and a bit years! Ah well, guess I'll have to wait!