Top tips if you are thinking about becoming self-employed.
During the course of the Coronavirus pandemic we have seen many businesses struggle and the inevitable loss of jobs, as the job market becomes tougher and because people have had more time on their hands being furloughed and have had time to reflect on their work life balance, it is inevitable that many are thinking about working for them-selves and setting up their own business.
As of the end of December 2019, there were five million self-employed people in the UK which represents 15.3% of employment in the UK. And according to the office of national statistics the most common type of self-employment is ‘working for yourself’
Data from ons.gov.uk
Setting up a business yourself can be very daunting but once you get going it can be very rewarding, here are a few tips to help get you started.
So, you are thinking about going self-employed what are some of the benefits? Well primarily, you get to be your own boss. You get to choose what work you do and when you do it, giving you much more flexibility and greater control over your work life balance.
Many people choose to go self-employed because they can earn more by providing the service or products directly.
But, be assured, many self-employed people find themselves very busy and you will have commitments that you may not have accounted for. You will be responsible for meeting your customers’ expectations by yourself, growing your business to make it financially viable and running everything behind the scenes.
When you are working out if being self-employed is right for you, it is important to prepare ahead of time, plan well and be prepared to adapt, some of the things you should consider are:
- Do you have the financial investment to get set up in the first place?
- Where will you carry out the work? Do you need an office or workshop space? What equipment will you need? How much will it all cost?
- How will you go about getting new clients?
- Can you manage financially if you have spells of little or no income?
- Will you be working on your own? If so, how will you find it having no work colleagues to work with?
- If you will need people to work with, how will you go about getting them and paying them?
- Have you considered how you will deal with losing employee benefits such as holiday pay and pension contributions?
- Are you happy that you can properly look after the admin side of the business such as bookkeeping, cash flow and tax returns?
You will need to consider if you want to be a sole trader or set up a limited business and the structure of your business. If you want to set up a ltd business, you will need to register your company with Companies House. You will need to pay corporation tax and there are other implications.
There are pro’s and con’s to setting up as a limited business or as a sole trader. If you are ready to take the step into self-employment, there are some things that you are required to do.
Whether you set up a limited business or trade as a sole trader, you should:
- Tell HMRC that you’re self-employed, so that they know you need to pay tax through Self Assessment and pay Class 2 and 4 National Insurance contributions, you can find more information here https://www.gov.uk/self-employed-national-insurance-rates
- Make sure you set up suitable insurance for the type of work you will be doing.
- Set up a separate business bank account to keep your business and personal expenses separate.
- Consider finding a suitable chartered accountant to help prepare your annual accounts and tax returns although this is not a legal requirement to have one.
- Consider how you will keep track of your business finances, will you use software, have you considered a bookkeeper?
- If you are going to be working from home, check your tenancy agreement or mortgage agreement to make sure you’re not contravening any terms. You may need to notify your landlord or mortgage lender.
- If you are not sure about all of these things, you could consider a franchise, the benefit of a franchise is you get support from a franchisor that can help you get everything in place and there will be a network of like-minded people running a very similar business to talk to and ask questions of without the worry about competition.
If you decide that becoming self-employed is right for you, plan well, do you research and enjoy.
If you need help with your bookkeeping, talk to your local Rosemary Bookkeeper today and ask how we can help.
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