You are legally allowed to setup an office in your home. However, if you plan to have employees there will be health and safety and insurance issues to consider. This article is aimed at giving advice to single individuals running a business from home. There are a number of benefits in working from home such as it being cheaper and you can claim expenses. There are disadvantages which also must be considered, the biggest being social isolation and lack of networking opportunities. There also general regulations and industry specific regulations you must adhere to.
Pros of Working from Home
It is generally much cheaper to work from home than renting a hot desk. Renting a desk can cost anywhere from €200 – €350 per month. The money saved from renting a desk can be reinvested back into the business. It can be spent on additional advertising to boost sales or to hire a freelancer to improve your service.
You can also expect bigger savings if you need to rent a premises for your business. Being able to run your business from home is generally the cheaper option.
For most office based businesses you don’t need a lot of things to get started at home. Most homes would have a PC or laptop, internet and a desk to work on. Because of this it is very quick to start working from home.
You will save a significant amount of time each working day as you do not need to commute to the office. Also, depending on how you commute it can also reduce your stress levels.
Working from home offers greater flexibility. You are not restricted by office opening hours. You can plan your day to suit your schedule. You can start as early or as late as you want.
Working from home allows you to be more responsive to potential clients. If you work in a rented space you may only work during the hours you are in that space.
Opportunity to test a business idea
Linked to the previous point, if you are just at the idea stage working from home will give you a better opportunity to test a business idea without wasting money. As you are spending less money you have more opportunities to test your ideas.
Cons of Working from Home
One of the biggest disadvantages of working from home is social isolation and the negative effects it can have on mental health. For some people the isolation is welcomed. For others who have a strong need for social interaction, the social isolation of working from home could have a very significant negative impact on your ability to work.
If you are one of these people who need to work with others around it might be a good idea to network with other entrepreneurs in a similar situation and invite them to work in your home. If possible, it might be a good idea to try to find those who complement your skillset. Eg a sales person & an accountant.
Lack of Networking Opportunities
I visited the wework office a couple of months ago. I was really surprised by the amount of startups renting their office space because it is not cheap. The environment they have created is very impressive. You have an amazing opportunity to network with many different people. People who can provide you with useful advice or people who could introduce you to potential clients.
In some cases your home may not be suitable for a business or it may take longer to setup.
It may be easier for some to work in an office as there are fewer distractions. Particularly if you have a young family. It can be very difficult to get focused work done.
Harder to separate work from living
For a lot of people they need to have their life separated from work. When they leave their place of work their brain completely stops thinking of work. For these types of people working from home can be a nightmare because they are always thinking about work.
There are legal restrictions which will prevent you from using your home for certain uses. Generally you need to apply for permission from the local council to run a business from your home if your business will have any impact on your neighbours. For more information speak to your local council.
There will also be health and safety issues to consider if people need to be physically present at your business.
For those who can walk to a place of work no commuting can be a disadvantage. Being forced to walk everyday has a number of health benefits such as weight loss, improved cardiovascular health as well as a number of other benefits associated with increased vitamin D absorption.
Examples of Businesses you can run from Home
- Office based services, some examples include: accounting, graphic design, recruitment, web development, architect etc.
- Sales either – over the phone or through an online shop.
- Food manufacturing
- Personal assistant
Tax Benefits from Working from Home
There are a number of tax benefits associated with working from home.
You can expense a reasonable portion of your rent
You can expense a reasonable portion of your electricity and heating expenses.
You can expense a reasonable portion of your internet expenses.
You can expense your setup costs. Items such as desks, chairs and equipment needed to perform your job are depreciated over 8 years.
You can use business equipment for personal use as long as that use is minimal and doesn’t result in additional expenses to the businesses. If your use of business assets is not minimal then you will need to pay benefit in kind. Major structural changes to your home property can not be expensed to your business.
Mortgage – If you have a mortgage it is not recommended you charge rent to your business. It will be taxed as income so there is no benefit. You can expense the interest portion of your mortgage but if you are claiming interest relief you must exclude that portion. Also, not the interest relief scheme is due to end on 31/12/2020.
If you are an eWorker or working from home you are entitled to a payment of €3.20 per day tax free. This applies to employees only.