A Guide to Going Self Employed in the UK
The UK’s budding entrepreneurs find themselves in a very advantageous position. There are many of us who hold dreams of running our own business and when those dreamers start to take the steps to realizing their goals, it is very easy to say, “I am going to be self-employed and will start my own business.” In the initial planning stage, aspiring business owners are willing to share their ideas and objectives while hoping they are about to strike gold. What is often overlooked, are the steps needed to get the business up and running. While fresh entrepreneurs can be distracted by the bright lights of the future and well-aware of the hard-work needed to achieve success, the unglamorous administrative side of starting a business is rarely given much thought.
How to become Self-Employed
The life of a self-employed person, working as a consultant or creating their own company, is portrayed as an ideal life. Working on your own terms with nobody but yourself to answer to, is something most people dream of every time they get an ear full from their boss. But the steps to becoming self-employed are not widely known.
The most important thing to be aware of when you do want to become self-employed, is that you notify HMRC within 3 months of creating the business that you are earning NON-PAYE income. Otherwise, it will lead to fines & penalties.
After notifying HMRC, you are free to set up your business in any way you desire. You can freely decide –
- What industry you want to work in
- What services you want to sell
- What prices you want to charge
- Whether to hire any staff
- Who your target customers are
The benefits of being your own boss is given below –
- You are in control of everything – you only answer to yourself
- You decide your working hours
- You hire who you want
- You do not have a fixed salary
- You feel a sense of achievement when your business grows
Things to consider when going self-employed
Although the life of an entrepreneur can be portrayed as this ideal state in which everything is great and you can do what you want, the reality is a lot more daunting. People often fail to consider the stress and workload of starting their own business and can quickly become overwhelmed by it all. We have a few things for you to consider before deciding that going self-employed is really for you:
- Being your own boss, you must manage all the different components of your business: marketing, operations, finance & IT
- If you cannot work for any reason, nothing gets done
- You will require additional insurance cover for your business
- If you employ staff, you must engage in PAYE calculations and have a pension scheme
- The amount of necessary admin work increases
Setting yourself up as self-employed
It is often thought that when working for yourself, you can pay a better rate of tax as opposed to paying paid as a PAYE employee. And while this may be correct, you are subject to less employee rights as a consequence. In going self-employed, you receive no sick pay, no holiday pay and if a self-employed contractor – a very short notice period.
If you are building a company then you should set up your business as a limited company. You can do this directly through Companies House and is the best method of getting a business online.
If you go self-employed, then you must file your self-assessment tax returns every year. It is important to declare all the income you earned & every expense you incurred during the tax year. Not declaring the full tax information will lead to fines & penalties by HMRC.
Business Banking options
If you want to be a sole trader, you must differentiate your business income, personal income as well as the expenses. Banks do not allow any sole trader to deposit business income into his or her personal account. Even if you could make the deposit, it would be very difficult for you to prepare your self-assessment tax return. Therefore, the best option is to open a business bank account. It is free of charge.
Read more- Do you need business Bank Account?
How to make your income work harder for you
If you are having savings or earning income in your business, you may go for different business savings accounts options available. Most of the banks only pay 0.01% of interest on credit balances in the current account. If you will open the best saving account, you will get good interest on your savings. It is very easy to open a savings account and you will receive at least some credit for your hard work.
Finding the right insurance for you
Finding the right insurance for your business is not an easy task. There are many insurance providers with an even wider range of policies. These are required by businesses to cover all aspects of your business, such as products, dealing with members of the public, visiting client premises or employing staff. If your business will provide advice or a professional service for clients, then it is imperative you are insured with professional indemnity insurance for the services you offer. If you are taken to court due to the mistakes made in your business, your insurance cover will cover you against all incurred cost. You can leave public liability insurance until you employ staff.
What can Nomisma software do for the self-employed?
Nomisma accounting software is very useful for self-employed. It can manage all business finances with real time information to provide an informed overview of your company’s health. It can also create and record income, payments, purchase and sales received or generated by your business.
You can try our software with a free 30-day trial. Just call our experts on +44 (0) 20-3021-2326 or e-mail us at email@example.com