Practical guide to becoming self employed
You may have decided to become self-employed for a number of different reasons. The lifestyle and potential financial gains may be appealing, perhaps you have a new business idea or it may be that an employer requires you to be self employed in order to secure a contract of work with them. Whatever the reason, here are some practical steps to help you develop your plans.
Understand the terminology.
You can choose to structure your business in different ways and the decision you make will impact your personal and tax liability. Understanding the differences between your options enables you to make an informed choice. The 4 main types are sole trader, partnership, private limited company, limited partnership and limited liability partnerships. See https://www.gov.uk/working-for-yourself for further information.
Contact government backed agencies who provide free advice on becoming self employed. They can help you with any of the steps mentioned in this article, and may also be able to signpost financial help such as small business grants.
Choose your name. Select the name you want to register under and register for income tax and national insurance. Search Companies House to make sure the name is not already in use https://find-and-update.company-information.service.gov.uk/company-name-availability
Write a business plan.
This important document evidences how your idea translates into a business, and is needed if you intend to raise finance to support your business.
Create a budget.
A well thought out budget will help you to set goals, monitor progress and measure your financial success. It can also help prevent you from overspending.
Check what records you need to keep and for how long.
It will save you time and stress if you establish a system for this from the outset. You may wish to consider hiring an accountant to help you with this.
Set up a business bank account.
Whilst this is not mandatory if you choose to operate as a sole trader, it can help with record keeping and look more professional to your clients.
Business insurance covers you against financial losses should something go wrong. There are three main types; public liability, employer’s liability and professional indemnity insurance. In addition, there are many other types of insurance available including income protection, critical illness and business equipment to name a few. Do your research to make sure you are weighing up the risks and choose the correct policies for your circumstances. In addition, if you will be working from home, check your tenancy agreement or mortgage and home insurance to make sure working from home does not impact your terms and conditions.
Being self-employed means you will not have access to a workplace pension. See a financial adviser for advice on how you can plan for your retirement. This may include setting up a personal pension.
Planning and research can really help you to save time and prevent costly mistakes, so reach out for help when you need it. Good luck with your new venture.
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