Going self-employed: 5 things to think about
A better work-life balance, escaping a boss from hell or the chance to follow your passions – these are just some of the reasons why many people want to work for themselves. Whatever the driving force behind your desire to break ranks and go solo, however, it’s not a decision to take lightly. For every potential upside there’s a possible downside. And it’s important you know what’s what.
Of course, there are always going to be challenges and considerations to deal with. But that hasn’t stopped a record 5 million people in the UK becoming self-employed. It shouldn’t have to stop you either. In 2019, official statistics reveal a consistent year-on-year increase in the amount of people who started working for themselves. If this appeals to you, here are some key points to consider:
Is it right for you?
It’s a pretty fundamental point, admittedly, but don’t underestimate it. Turning your back on life as someone else’s employee promises risks and rewards. Some questions to ask are how will you find customers; can you maintain a steady income; and can you do without your employee benefits?
If your mind is made up, however, then let’s talk about some of the finer details.
What type of business will you be?
It’s probably the first big decision you’ll need to make – whether you’re setting up as a sole trader, partnership or limited company. If it’s just you going alone, registering as a sole trader might make the most sense. It’s the most straightforward structure – especially when it’s all new to you.
Tax and national insurance
As a self-employed person, you’ll be the one responsible for paying the tax and National Insurance contributions you owe. So, one of the first things you’ll need to do is register with HMRC. You may find that circumstances can vary depending on your self-employed status in the eyes of HMRC.
You may also need to register for VAT if your business/venture has a taxable turnover of more than £85,000 each year. By doing this, you then need to charge VAT on any goods or services you supply.
Get your finances in order … and keep records
You may need to consider your financial options after becoming self-employed – particularly when getting your business off the ground. If you register as a sole trader, the need to get on top of your finances is important because there is no distinction between your personal and business accounts.
Protect yourself with insurance
You’ll almost certainly need to sort out insurance when you go self-employed. This helps to reduce any strain on your personal finances in the first instance. But it’s also a good idea to consider things like public liability insurance – especially if you go to customers or they come to you.
Other insurance types to consider include professional indemnity insurance, which covers you if a client is unhappy with your work and decides to sue. If you plan on employing anyone, meanwhile, you must have employers’ liability insurance by law.
Don’t forget – you won’t be covered by an employer if you fall ill either, so personal insurance can be the safety net you can’t afford to be without.