An Englishman's home is no longer his castle. It is, in fact, his shed. The humble garden shed, now often upgraded to a "garden room", has been quietly undergoing a rather spectacular makeover in recent years. Annual awards are now given out for the best shed and there are websites dedicated to "sheddies" and their fabulous creations.

After all, who doesn't secretly want a shed. It's about so much more than a place to stash the lawnmower. Paul Barton of roomworks.co.uk says: "It's a place to escape, and what's great about it is that a bigger shed is not necessarily a better one, so for once there's no pressure. It has a lot to do with nostalgia – it brings memories of carefree, happy times, playing hide-and-seek, having a crafty fag, maybe a first kiss.

"But the changing economy has also made a difference. People are losing their jobs and re-evaluating the way they work and play. For some, it's about pursuing a long-held dream to start their own business, for others, it's about splitting their job between home and office working."

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Barton, whose creations have included a floating office shed for someone who had a river at the bottom of his garden, adds that the joy of designing a shed is that it doesn't have to fit with the style of the house, so you can really let your imagination rip. "Remember – this year's teenage hang-out could be next year's hobby room or office. Be imaginative and remember that if you want to use it all year round, you need something that is fully insulated."

Which means, in a nutshell, that you will have to pay for it. Alex Johnson of www.shedworking.co.uk and author of the forthcoming Shedworking: The Alternative Workplace Revolution says that for about £5,000, you should be able to get a very good home office. "If someone starts working from home and saving several thousand pounds a year in commuting, then a shed can start paying for itself very quickly," he says.

Now, you do need to be aware that there are rules about the size of the shed you can install before you need to seek planning permission. Under the new laws that came into force last October, sheds are considered to be permitted development, which means they don't need planning permission, as long as you stick to a few guidelines (full details can be found at www.planningportal.co.uk). Philip Goldstone of The Garden Room Company says that such outbuildings – his are so much more than a simple shed – are gaining in popularity all the time, but offers the following rule of thumb.

"The main one is that a shed should be two metres away from the boundary of your property, and then you don't need planning permission. If your land isn't big enough for that, you can ask for permission to put it only one metre away, and as long as you get on with the neighbours and keep them informed, it shouldn't be a problem.

"With more people working from home and perhaps using the spare room as their office, building a garden room allows them to reclaim that bedroom and work in the garden," he said.

"They are great for music rooms or lessons, or as a gym as well as an office. Our products come fully finished with plasterboarded walls, electric power, sockets, lighting, laminated floors, double glazing and insurance-rated locks."

Ah, yes. It is ultimately a shed that you are planning to fill with expensive computers, hi-fis and the like. You need to make sure that the locks are good and the windows are strong, and then you need to ring your insurance company and have its contents added to your policy.

Once you have decided on what you want to use your shed for, it's about how much you want to spend. Obviously it's a lot cheaper than an extension and, as most of them can be assembled in a week, it's a lot less dusty and disruptive. It's also worth pointing out that a good shed will create some prospective buyer lust for those of you who plan on selling up leaving your shed one day.

As with most things in life (especially when it comes to homes), it's about what you can afford and what you are prepared to spend. B&Q have a basic shed from £699, although that is a basic garden storage model. Roostuk have some fabulous creations that are just short of £20,000. So it's up to you and your bank manager to decide what you can have. Let's not forget that George Bernard Shaw worked from a shed at the bottom of his garden – albeit a revolving one that moved to catch the sun – so buy yourself a shed, a best-selling publication may follow and you could recoup your money.