Lots of people start a new year with plans for change. But sadly, by February, most of those resolutions have fallen by the wayside. One popular desire for many is to change the way they work. Perhaps they are tired of the daily grind, want to try something new or seek that elusive work/life balance.
If you have ummed and ahhed about whether to go it alone, we can help.
We’ve got some tips for getting started - from weighing up the pros and cons of self-employment, to understanding what to do to get the ball rolling..
The Pros
- You have more flexibility on your hours, so it may be easier to fit work around other commitments and responsibilities such as childcare.
- Your work can be more varied.
- It can be tax-effective
- You can deduct certain costs - travel and some utilities bills, for example - from your income when you’re calculating your tax liability.
- You may have the potential to earn more money, as day rates for self-employed consultants and freelancers tend to be higher than salaries.
- You could work from home, or from your own business premises.
- You will feel immense pride in your achievements
- You are your own boss.
The Cons
- Finding clients be challenging.
- There are likely to be some start-up costs.
- Your income isn’t guaranteed and there might be periods of little or no income.
- You have to be good at keeping thorough records and meeting certain deadlines.
- The impact of losing employee benefits - holiday pay, sick pay, and employer pension contributions - can be difficult
- You bear the responsibility for the failure or success of the business
- It can be more difficult to get approved for renting property, taking out a mortgage or getting a loan when you’re self-employed
- It can be difficult to separate your home life from your work life
- Working alone can be isolating
Be sensible
It is important to be realistic about your expectations before you take the plunge - and this can also help you plan effectively.
If you decide to go for it, there are several things you need to do, including telling HMRC that you’re self-employed for tax purposes, deciding on a business structure and sorting out insurance.
Your business structure will depend on whether you register yourself as a sole trader or start a limited company.
If you are registering as a sole trader you need to 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.
If you’re starting a limited company, you need to register with Companies House, draw up a memorandum of association, and pay corporation tax.
You also need to set up a business bank account and establish a process for recording your profits and evidence of your business expenses. This will make it much easier when it comes to completing your HMRC tax return.
If you’ll 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.
There are lots of different insurances you might need to look at when starting up. Professional indemnity insurance and public liability insurance are the main types of business insurance to consider. If you’ll be employing anyone, you’re usually legally obliged to have employers’ liability insurance too.
This all might sound like a lot of work. But actually, an awful lot of it can be done by an accountant, freeing you up to source customers and get cracking.
Contact us today to find out how we can help you achieve your self-employed dreams in 2017.