Becoming self employed can offer many advantages. You can choose your hours of work, work in a business you enjoy and, often, work from home. There are plenty of reasons to be your own boss.
However, with these benefits come many responsibilities. You don’t have an employer looking after you and so you’re charged with overseeing all aspects of your business.
Our guide looks at the top five areas to consider if you’re self employed.
How to Trade
If you are self employed, or you are considering setting up your own business, one of your first decisions will be to choose the way in which your business will trade.
You could set your business up as:
• A sole trader
• A partnership – similar to a sole trader except two people run the company
• A limited company – gives your business a separate identity from the people who run it
You should seek advice from a business organisation or accountant about the best way to set up your business.
If you’re self employed, you will be responsible for paying income tax on your earnings. As soon as you decide to become self employed you are required to inform HM Revenue and Customs and register for self employment.
Tax is a complicated area and there are lots of reliefs and tax allowances that self employed people can claim. Many self employed people employ the services of an accountant to help them with their tax affairs.
Depending on the turnover of your business you may also have to pay Value Added Tax (VAT). This is a tax on goods and services and you may or may not have to pay it depending on the type of business you run and how much your business sells.
Health and Safety
If you’re self employed you will be responsible for ensuring that your business premises and working environment comply with all health and safety requirements. You can obtain details of your responsibilities from your local environmental health unit or from your nearest health and safety executive.
National Insurance Contributions
When you are self employed you have a duty to pay National Insurance contributions for both yourself and any staff that you employ. The amount of contributions that you have to pay for yourself and your employees depends on how much you and they earn.
When you run your own business it is vital that you keep detailed and accurate records of your business transactions. These may include invoices, sales receipts, purchases and wages.
You may be organised enough to keep records of your business or you may choose to employ a bookkeeper or an accountant. If you trade as a limited company then you will need the services of an accountant.