Many people see the United Kingdom as an attractive place for starting a business from home in the UK for several reasons. For instance, the UK is geographically close to mainland Europe and is an important trading partner with the United States.

Also, it’s one of the world’s leading economies, and many of the world’s top brands either have European headquarters in the UK or have a significant presence in the British Isles. You’re likely reading this because you’re thinking of moving to Britain soon.

But, you also have plans to start a home-based business in the UK.   While you’re excited about your business name, plan, and web development, there are a few legal steps you must take before starting your entrepreneurial journey in the UK.

Apply for the right visa

Before moving to the UK,  you need to apply for the correct visa. The UK has different visa categories for entrepreneurs, such as the start-up visa for those launching innovative businesses.

If you’re planning to move to the UK from the EU, you’ll have to apply the same way as non-EU citizens due to Brexit. It’s possible to apply for a visa ahead of time, like a start-up visa for an innovative business.

Once your visa gets approved and you start to settle into life in the UK, you’ll need to apply for a UK indefinite leave to remain. It’s a form of permanent residence that you can get if you’ve lived in Britain for at least five years.

It’s important to regularly check the UK government’s official website for the most current visa information and requirements.

Think about the best business legal structure

When the Home Office allows you to start a business in the UK, you can start putting your plans into motion. One point to consider is the legal structure of your business. When you start a home-based business, you can do so as a sole trader and use your name for your business or a trading name. You can only do the latter if no one else is using your desired trading name.

When setting up your home-based business, one key decision is choosing your business structure. You can operate as a sole trader, or you can incorporate your business as a limited company. Each option has its own legal and tax implications, so it's a good idea to consult an accountant or business advisor to determine which structure best suits your needs. A limited company registered for VAT, for example, may offer several tax advantages, but it also comes with more accounting procedures to follow, such as multiple returns throughout the tax year with Companies House.

There are pros and cons to the various legal structures available to entrepreneurs in the UK. With that in mind, it makes sense to speak with an accountant or a business mentor to determine which one is right for you and your needs.

Register as self-employed to operate as a sole trader

If you're running a business from home in the UK as a sole trader, you will need to register as self-employed with HMRC. This is a requirement for anyone starting a business as a sole trader, and you can do this online. You will also need to file annual tax returns and pay income tax and National Insurance contributions based on your profits.

However, if you decide to set up a limited company, you do not need to register as self-employed. Instead, your limited company will handle its own tax responsibilities, and you will be taxed as an employee or director through salary and dividends.

Almost everyone working in the UK, whether they have permanent residence or are on a working visa, has a tax threshold, meaning you can earn up to a specific amount before you need to start paying income tax and National Insurance contributions. However, high earners may face different tax rates and thresholds, as they will pay tax on all income above a higher threshold. For more details, refer to the latest guidance on the HMRC website.

These articles may be helpful if you are becoming self employed in the UK:

• 3 steps to setting up your business online
• 6 handy tax tips for bloggers and self employed
• 3 important things to consider when starting a self-employed business

Business bank account

Whether you're a sole trader or operating a limited company while running a business from home in the UK, setting up a business bank account is highly recommended. It will help you manage your finances more efficiently, separate your personal and business expenses, and stay organised, especially come tax season. A dedicated business account can also help you maintain accurate records, which is crucial for managing cash flow and preparing for your annual tax returns.

Consider the Tide business account in the UK and get £50 free cash!

One option to consider for your business bank account is Tide, a popular provider offering no monthly fees for sole traders and limited companies. There’s a fee of 20p per transfer in and out of a Tide account on the standard free plan.  It’s £1 per cash withdrawal. Other fees may apply, check their website for the latest information.

At the time of writing, you can get £50 free cash if you enter Tide referral code K754KJ and spend £500 in the first three months.  Easily done if you're planning a big business purchase.  Opening an account took me less than five minutes! Click here to signup to Tide.

Make sure referral code K754KJ is entered in the promo code section during signup to qualify for the free £50.  You can check in the app under More>Referrals>Redeem to ensure it was entered if you have any doubts.

According to the terms: "For each referral, a £50 reward will be applied to the Referrer’s existing account and the Referee’s new account, once the Referee has successfully opened an account, and made valid card transactions to the value of £500 within three months of account opening, excluding any disputes and recharges. It can take 6-8 weeks for this to be validated and the reward to be transferred". Referral terms and conditions are here.

Get the right insurance

It’s important to get the right insurance to protect your UK home-based business. Consider types of cover such as professional indemnity, public liability, and employer’s liability (if you have staff). This will ensure you're legally protected if any issues arise.

Getting insured means you have legal protection if things go wrong and you have legal disputes with customers. It can also provide cover for your equipment and any business stock.

Take a look at this guide on starting a business for other tips and strategies that apply to anyone starting a business in the UK.

Accounting and Bookkeeping

To ensure you stay compliant with tax regulations in the UK and keep your business running smoothly, using accounting or bookkeeping software is a smart move. Tools like QuickBooks or Xero allow you to easily track income, expenses, and other financial records. For those running a limited company or who are unfamiliar with tax rules, hiring an accountant can be a good idea. They can help ensure your financial records are in order and assist with more complex aspects of business finance, like VAT registration and filing with Companies House.

Data Protection

If your business handles customer data or operates online, it's essential to be familiar with data protection laws, such as the General Data Protection Regulation (GDPR). Compliance with these laws helps ensure that you protect your customers' privacy and avoid penalties. As part of this, you’ll need to implement proper security measures to safeguard personal information, inform customers about how their data is used, and give them the ability to request access to or deletion of their data when required.

Business rates for home-based businesses

Running a business from home in the UK can be convenient and cost-effective, but it’s important to be aware that some home-based businesses may be subject to business rates. This is especially true if you’re using part of your property for business purposes or if your business is generating a significant income. The rules for business rates depend on factors like the size of the property and how it’s used. Check with your local council to determine if your home-based business is subject to these rates and what exemptions or reliefs may apply.

Don't forget to do your research!

The UK is a popular destination for entrepreneurs, but it’s also a competitive market. Before moving, take the time to research the UK business landscape, including industry trends, costs of living, and available start-up support. Ensure that launching your business in the UK aligns with your goals.

Good luck!