The low down on becoming self employed
Here, we review a number of advantages of self-employment. You may be a graduate looking to develop your career, wondering what being self-employed involves.
Building a business in your twenties can reap dividends. As many followers of the television series ‘The Apprentice’ will realise, though, a number of entrepreneurial skills and personal characteristics are vital to succeed in business. Self-belief helps, as well as a good knowledge of exactly what you want to do.
Being the Boss
The advantages of being your own boss include being able to choose your own location and your customers. Your efforts are directly rewarded; a fact which can lead to enhanced job satisfaction. Other plus points include flexibility, independence and a potentially higher earning capability – although longer days and extra hours are often necessary. You can, of course, set your own schedule.
Working on projects and leadership skills should come naturally to the budding freelance entrepreneur. Enterprising individuals may well need to be creative, well organised and determined. The ability to see projects through to completion is one of the keys to growth – be it a successful, productive day or, in contrast, a cold, rainy Monday morning and the need to organise the week, make calls, catch up on book keeping and deal with half a dozen customers or orders to build the business.
There is also the self-discipline required to develop a business system, from modest beginnings to one that is growing well. Self-employed business people have to put in regular and concerted effort over time. An important skill is to recognise when to make changes and adjustments – and when not to.
Taxation and Paperwork
As a freelancer, we gain a wide portfolio of business skills and can claim legitimate business expenses against gross income to reduce taxable profit. However, there is no regular employer salary payslip or paid holidays, nor common perks and other benefits such as health care and bonuses. With the belief in a regular and permanent ‘job for life’ dissipating fast, many contented self-employed workers prefer their occupation to contracted employment. Other considerations include the fixed monthly costs, overheads and accountancy fees.
In the UK, self-employment tax regulations are published by HMRC (Her Majesty’s Revenue and Customs). It is also possible to telephone a local or area office and speak to one of their advisers. Accountants will be able to offer a complete advice service while accounting assistants will also be able to help with questions of a more routine nature.
Many people start working for themselves as a sole trader. It is also possible to gain a footing in the business world as a business partnership – or as a limited company, which have different accounting and taxation rules. Some IT and other contractors operate a limited company structure. Self-employment is defined by HMRC typically as running the business yourself with numerous customers and providing a service using equipment that you own.
Registering as Self-Employed
Once you are ready to register as self-employed, contact your local HMRC office or complete an online registration. It is important to maintain records of sales or other income with expenditure (receipts and invoices), in order to justify legitimate business expenses and reduce taxation liability. Tax payments are usually required half-yearly at the end of January and of July.
It takes approximately ten working days to complete the registration process; HMRC post a special registration code to your address. Ideally, registration should be completed ASAP after starting - but no later than 5th October in the second fiscal year (6th April to 5th April) from when the business first traded.
Most self-employed people also employ accountants, simply to allow them more time to focus on core business activities. The gov.uk website offers business support emails from HMRC, as well as help with ideas and how to turn plans into real products and services. Assistance is provided with developing and planning, getting funding and even the protection of intellectual property, where applicable.