How to Start a Baking Business From Home [UK 2025 Guide]

So your brownies are the talk of the WhatsApp group, and friends keep saying, "You should sell these!" Sound familiar? If your passion for baking is starting to smell like a business opportunity, it might be time to take it seriously.

So, welcome to the ultimate guide to starting a home-based baking business in the UK – everything you need to know!

Why should you start a baking business from home

Running a baking business from home is ideal for many aspiring entrepreneurs. 

Who it's ideal for:

Home baking is affordable to start and easy to scale. With the UK bakery market valued at £6.65 billion in 2024, there's plenty of demand. From birthday cakes to brownies-by-post, the options are endless.

And don’t worry – you don’t need a storefront. Your kitchen can be your castle, so long as it meets hygiene standards.

🍰 Want a stress-free way to register your business? ANNA can help you set up, manage finances, and keep your admin neat and tidy.

Understanding the market

Before you preheat the oven, let’s look at your customers. Understanding who they are, what they want, and how they behave will help you tailor your offerings (and your marketing) so you don't end up baking carrot cake for an audience that only wants chocolate.

Who is your target audience?

Let’s break it down:

🔸18–34-year-olds: This group is bakery-obsessed. According to recent stats, around 45% of them buy baked goods daily. Not weekly. Daily. That means there’s a strong chance your dream customer is a young professional scrolling Instagram for their next sweet fix.

🔸 Health-conscious eaters: Gluten-free, dairy-free, vegan, high-protein – you name it, there’s a market for it. As trends shift toward clean eating and conscious consumption, healthier baked options are getting more love than ever.

🔸 Busy families and event planners: Think birthday parties, baby showers, school events, weddings, and work functions. These customers want something special, custom, and stress-free and they’re willing to pay for convenience.

Buying behaviour and trends

Understanding how often people make purchases and what drives those decisions is key. Here’s a closer look:

🔸 Impulse treats: With rising living costs, people are cutting back on luxuries, but still treat themselves. A £3 cupcake? Still totally justifiable.

🔸 Instagram appeal: Products that are visually appealing get shared more, which means free marketing. Think of it as edible advertising.

🔸 Routine rituals: For many Brits, baked goods are part of daily or weekly habits, like a Friday office cake or Sunday family dessert.

Legal requirements & company setup

If you’re handling food for sale, the law wants you to play it safe for your customers and yourself.

Registering as a food business

Legally, you must register your food business with your local authority at least 28 days before you begin trading. This applies even if you’re part-time or selling occasionally. The process is free, and registration can't be refused.

Once you register, an Environmental Health Officer (EHO) will inspect your kitchen. They’re not looking for Michelin stars, but they will check your food safety setup and hygiene.

Registering with HMRC

Even as a small home baker, you need to register for tax purposes:

Platforms like ANNA make registration simple and even help with your tax returns.

Registering your business name

Choosing a name is your first real branding moment. Whether you go with something punny like "Cake Me Crazy" or elegant like "Willow & Whisk," your business name should reflect your personality and niche. 

However, you can’t just pick it and hope it sticks; you need to check that it’s available and then register it officially.

✅ Use ANNA’s company name checker to make sure your baking business name isn’t already taken.

✨ Need ideas? Check out this guide packed with inspiration: 100+ Catchy Food Business Name Ideas to Inspire You in 2025.

Food safety basics

Natasha’s Law

If you’re pre-packing baked goods for direct sale (like cupcakes in boxes):

This law (The UK Food Information Amendment) is named after a teenager who tragically died from an allergic reaction. It’s not optional, so be accurate and transparent.

Permissions and insurance

Some councils may require planning permission, especially if you have regular deliveries or customers.

✨ For more in-depth details, check out 7 Tips to Start a Food Business in 2025 [Step-by-step Guide]

Costs & finances

Starting a home baking business doesn’t require a massive investment, but you’ll want to budget wisely. 

Understanding your startup and ongoing costs will not only help you price your products correctly but also avoid those "uh-oh" moments when bills sneak up.

You don’t need to break the bank on day one, but having a basic budget plan can keep your business sustainable and save your savings account.

Monthly costs

Monthly expenses can vary depending on how many orders you take on, but here are the common costs you’ll need to manage:

💡Pro tip: Use ANNA’s Smart receipt scanner that automatically categorises receipts by categories and then uses them to calculate your taxes.

You’ll start to see which months are busiest and what expenses are seasonal (hello, Christmas rush!).

Pricing strategies

Many home bakers use cost-plus pricing, which helps ensure your time and costs are fully covered:

               Cost of ingredients + Time + Overheads + Profit = Final Price

Let’s say your signature cupcakes cost £1.20 each to produce (ingredients, electricity, and packaging included). 

Add your time (say £1 per cupcake), overheads (£0.30), and desired profit (£0.50), and you’ll be looking at a sale price of around £3. 

This gives you roughly a 60% margin – a sweet spot for most home businesses.

Remember to adjust pricing for:

Also consider checking out what similar home bakers in your area charge. Pricing too low undercuts your value and the wider baking community. Pricing too high? Be sure your branding, quality, and service justify it.

Getting customers

Even the best chocolate cake won’t sell itself. Acquiring customers is one of the most crucial aspects of running a home baking business, particularly in the early stages.

Luckily, with a few smart strategies and some mouthwatering content, you can start building your customer base quickly.

Let’s break this into three key pillars: local outreach, online marketing, and customer retention.

Start small and local

Starting in your immediate area is often the easiest and most effective approach. Your neighbours, friends, and community are more likely to support a local home baker than a faceless brand.

Here are some ideas:

If your area has a community newsletter, WhatsApp group, or Facebook page, don't be shy – announce your business launch with photos and an irresistible offer.

Online marketing tips

Social media is where baked goods go viral. Don’t underestimate the power of a gorgeous cupcake photo with the right hashtag.

Here’s how to get started:

A good tip is to batch-create content once a week. You don’t have to post in real time every day but just appear consistent.

Tax, accounting & compliance

This is the part where your eyes might glaze over, but stay with us! Keeping your finances in order is just as important as perfecting your sponge. 

Good bookkeeping helps you understand what you’re earning, track what you’re spending, and stay on the right side of HMRC (because let’s be honest, tax trouble is the kind of heat no baker wants).

If you're not sure which structure is right for you, ANNA can walk you through the setup process and even help you register with HMRC. The platform simplifies bookkeeping, expense tracking, and tax returns, so you can spend more time baking and less time banging your head on spreadsheets.

VAT

VAT (Value Added Tax) registration is only required once your turnover exceeds £90,000 in a 12-month rolling period. That said, even if you’re below the threshold, you can voluntarily register if it benefits your business, for example, if you buy a lot of VAT-taxable supplies or equipment and want to reclaim the VAT.

But for most home bakers just starting out, staying under the threshold is common and simpler. Just keep an eye on your income and set reminders to review this monthly, especially if your orders start booming.

What to track

Staying organised from day one is a huge time-saver and a stress-buster come tax season. Here’s what you should log regularly:

Why ANNA +Taxes is a game-changer for home bakers

ANNA offers much more than a business bank account. ANNA +Taxes service is built to help small business owners like you stay fully compliant while saving time and money:

✅ Register for VAT, PAYE, and Corporation Tax

✅ Auto-calculate and file VAT Returns, Corporation Tax, and Payroll with ease

✅ Use the smart receipt scanner to snap expenses and match them to transactions automatically

✅ A personalised tax calendar so you never miss a deadline

✅ File Corporation Tax and Annual Accounts if it’s your first year of trading

✅ Track your bookkeeping health with Bookkeeping Score and get tasks to tidy up your records

✅ Reserve tax money automatically using Pots, so you're always prepared for HMRC

✅ Get quick answers with Tax Terrapin, ANNA’s AI-powered tax bot (trained on HMRC docs!)

✅ Create professional invoices with payment links or QR codes so clients can pay easily

Try ANNA +Taxes for just £3/month for the first 3 months, then £24/month +VAT after that.

Wrapping up on how to start a baking business from home

You’ve nailed your signature bake. You’ve priced your cupcakes and found your first customers. Now it’s time to make sure the business side rises just as well as your sponges. Staying on top of taxes and admin might not be glamorous, but it’s what keeps your kitchen running smoothly.

Let ANNA take care of the boring stuff, so you can get back to buttercream and biscuit orders without worrying about VAT returns or Corporation Tax filings.

Let’s get that apron on and make it official.