One in six (17%) people in the UK (or 8m) are operating as an online business from home, specifically purchasing goods to resell, or making their own products to sell for profit, according to new research from Direct Line for Business (DL4B).
The research revealed of these home businesses, 5.2m (65 %) are buying items specifically to resell on at a profit, while 2.8m sell home made products such as greeting cards, soaps and eBooks. DL4B has termed these companies ‘home webtailers’ – retail operations selling goods direct from home using the internet.
The research also revealed three in four (74%) home businesses keep all their stock at home with an average value totalling £4,388, a risky proposition given in the last year there were 653,000 burglaries in England and Wales, said Direct Line. Many of these businesses would not be covered by standard home insurance policies, requiring specialist business insurance, as these goods to not constitute standard home contents.
Analysis of trades on a leading online auction site showed a large number of online sales operations run by private individuals are actually sizable businesses, with the top 5% of private sellers generating an annual turnover of a very healthy £18,094. With the new personal income tax threshold of £9,440 now in place as of the 6 April 2013, DL4B believes a significant number of people selling products online will be unaware their activities online mean they are actually running a business from home. Those operating a business from home on top of other employment may need to pay tax on all turnover generated through online sales.
Jazz Gakhal, head of Direct Line for Business, said: “A large proportion of people clearly don’t view themselves as running a business, despite generating a sizeable turnover selling goods online to be dispatched from their home. People should check with HMRC if there activities online mean they qualify as running a business. Stock stored at a home will not be covered by a standard home insurance policy, so people are putting themselves at financial risk. Indeed for those people transporting goods to and from home, insurance is also required to avoid damage in transit.
“We urge people looking to make or sell items from home on a regular basis to organise home business insurance from the start.”
The research also revealed that when asked about how these online home businesses prioritised key actions when they first began selling items, sorting tax arrangements and organising insurance ranked sixth and eighth.
Table One: priorities for those operating online businesses from home
Home Business action
Buying more stock
Setting sales targets
Devising a business plan
Making expansion plans
Creating a marketing plan
Sorting tax arrangements
Developing their office layout
Looking to recruit
Source: DL4B, April 2013