We’re used to working from home – but how does running a business from home affect your mortgage?

For instance, if you run your business from home, it can even affect your mortgage and potentially your tax position. 

What does this mean? Effectively, it means that you will need to ask your mortgage provider for permission to run your business from the property. In many cases this will be a simple matter of phoning the bank or building society, assuring them that the business will not alter the building in any material way and obtaining a letter of permission. However, some residential mortgages include terms that specifically prohibit running a business from home and you will need to tread carefully. Breaching the conditions of your mortgage can have severe consequences, so it’s essential that you check with your mortgage provider and obtain permission in good time before starting your business. If you’re found to be in breach of contract, the bank could – in the worst scenario – require immediate repayment of the mortgage.

But as long as you’re not making significant changes to the property – adding an extra room to use for your business, say – it’s unlikely to affect your residential mortgage. Working online from a home office, for example, won’t affect a residential mortgage. There are, however, instances when your residential mortgage will need to change to a semi-commercial mortgage. If you want to create a studio to teach yoga from, for example, or use a room for therapy sessions, there could be an issue. Generally, lenders will look at the amount of floor space used for business, and their thresholds can vary. Usually, if more than 30% of your total floorspace is dedicated to your business, then you’re likely to need a semi-commercial mortgage.

It’s also important to check that there are no restrictive covenants or legal restrictions relating to business use of your property contained in the Title Deeds, held by the Land Registry. The council can advise you of other criteria you need to adhere to, depending on the type of business you plan to operate from your home, and whether it might need a specific licence. You might need permission if customers will be visiting your home regularly; and you may need to pay business rates on the section of your home used for business, alongside paying  council tax on the rest of it. 

So if you’re thinking of setting up a business from home, it’s important to look into all of these issues. More information can be found here.