Blog

Thinking of Becoming Self-Employed?

The inspiration for this blog came as a result of a recent influx of enquiries from people just starting out in their journey of self-employment. Starting a new business is an exciting time and we enjoy our role of nurturing new ventures.

 

Here are a few things that you need to do when deciding to go self-employed:-

 

Can you Test the Water

First of all, dependent on what type of business that your decide to go into, can you trial this while still in employment? This gives you the added security of a pay check whilst you are learning your new business.

 

Have a Plan

Most of our clients start with a clear idea and entrepreneurial spirit. But you need a business plan too, this is key to helping you think through your business in its totality, a strong accurate plan can keep you on track and accelerate your success. It doesn’t have to be perfect. The fear of it needing to be perfect puts people off from writing a plan in the first place. A good plan is always evolving, use it as a working document.

 

Free Consultations

It is vital to get proper advice at the start from a good accountant, their experience of working with many clients running different businesses can prove to be invaluable to your business. Many accountants offer free consultations, if you see this offer, take full advantage, you will reap the rewards.

 

Choosing a Structure

You will want to consider the structure of your business. If you have taken advantage of a free consultation with an accountant, they will certainly cover this for you. The main options are: sole trader, partnership, limited company or umbrella company.

Many people start out as a sole trader as it is relatively simple to set up. The main responsibility is to register your new status with HMRC, as well as paying income tax and National Insurance contributions.

You may be going into partnership with another or more, all partners are responsible for tax and National Insurance on their share of profit and all have a joint several liability for business debts unless the partnership chooses a LLP status.

After advice, you may start out as a limited company. There is more paperwork involved but there are more advantages when it comes to paying tax and expenses that you can claim. If you are correctly advised, this option may allow you to keep more of the income that you have earned.

You can also start out as an employee of an umbrella company if this appeals to you. The umbrella company manage all of your paperwork and administration, all you will have to do is submit your timesheets, and in return, you pay a fee to the umbrella company. Your tax status is that of a PAYE employee and the advantages of having no responsibility for any paperwork is pleasing to many contractors but you may pay more in tax than other options.

 

Registration

Having worked out which way you would like to structure your business, the next step is registration. You must register as self-employed with HMRC within three months of starting trading, even if you already pay tax via the self-assessment process each year. You will also be responsible for paying your own tax and National Insurance contributions.

If you are setting up as a limited company, you will need to choose a name for your business and register with Companies House. Deciding to go forward as an umbrella company employee, you will need to find a suitable organisation to sign up with, either a specialist accountant or a recruitment agency.

Earning Close To or Above the VAT Threshold

If you think that your business will generate an annual turnover of £82,000 or more, you must register for VAT. And at any point in the year, if it looks like you’re going to hit this annual VAT threshold, you need to register. Make sure you notify HMRC within 30 days, or you will be at risk of paying a penalty.

You can also register for VAT even if you don’t turnover that much. There are advantages to having a VAT number, it does hold a certain credibility in business, and the VAT can be claimed back on eligible purchases you make.

There is also the flat rate VAT scheme as well as the standard VAT scheme, your accountant will be able to advise you what is right for your business.

Insurance is a Must

By law there are certain insurance policies that you will need to have dependent on your industry. As a rule of thumb, employers liability insurance is required if you have employees. Public liability insurance, is a must for any small business, this will protect you if a third party injures themselves, or damage is caused to the property because of your business activities. Professional indemnity insurance should also be considered if you provide any type of professional service or advice to clients, you should be covered if a client chooses to sue because they are unhappy with your work or advice you have given.

Essential Tips for looking after the Paperwork

Keeping on top of your paperwork as a small business owner is a necessary evil, to know exactly where your business is up to. Right from the beginning keep your business account separate from your personal account. Simple advice, we know, but keeping both accounts separate will make it so much easier to reconcile when it comes to your year end. You don’t want to miss important expenditure which you could have otherwise claimed for.

Other Good Habits

Establish a regular routine to collate and file your expenses and incomings; daily, weekly or monthly, to a regularity that suits your business. By introducing this easy discipline, you will save a great deal of time, not to mention stress. Another simple piece of advice but this is a huge issue for many small businesses. We have written another blog on this subject alone, certainly worthy of a read for anyone starting out.

Remember, not all accounting firms can offer strong business advice, we are dedicated small business accountants and business advisors and offer a full range of services. If you would like our advice on starting out in business, please call us on 01253 899989 or you can also take full advantage or our free consultation.

Comments are closed.


×


Thank You



Your Information has been submitted successfully.