Things to consider when going self employed
Friday 9th June 2023
Lee Pedlar
Setting up as self-employed in the UK involves a few key steps. Here's a general outline of the process:
Register for Self-Assessment: As a self-employed individual, you'll need to register for Self-Assessment with HM Revenue and Customs (HMRC). You can do this online on the HMRC website or by completing and mailing a paper form.
Choose a Business Name (if applicable): If you plan to operate under a business name rather than your personal name, you should choose a suitable name for your business. Ensure that the name is not already in use by another business and check if it requires any registration or trademark considerations.
National Insurance Contributions: You'll need to register for National Insurance contributions with HMRC. This process is typically done automatically when you register for Self-Assessment. National Insurance contributions cover your entitlement to state benefits and your contributions to the state pension scheme.
Keep Financial Records: As a self-employed individual, it's essential to keep accurate and organized financial records. This includes records of your income, expenses, and any relevant receipts or invoices. Maintaining proper records will make it easier to complete your tax returns and ensure compliance with HMRC requirements.
Understand Tax Obligations: Familiarize yourself with your tax obligations as a self-employed individual. You will need to complete an annual Self-Assessment tax return and pay income tax and National Insurance contributions on your earnings. Consider seeking advice from an accountant or tax professional to ensure you understand your tax obligations fully.
Set Aside Money for Taxes: It's important to set aside money throughout the year to cover your tax liabilities. The amount you need to save will depend on your earnings and the applicable tax rates. It's a good practice to regularly transfer a portion of your income into a separate tax savings account to avoid any financial strain when the tax payment is due.
Consider VAT Registration: If your annual turnover exceeds the VAT threshold (currently £85,000 in the UK), you may need to register for Value Added Tax (VAT). VAT is a consumption tax, and registering for VAT means you'll need to charge VAT on your goods or services and submit regular VAT returns to HMRC.
Obtain Business Insurance (if necessary): Depending on the nature of your self-employed work, it may be advisable to obtain business insurance to protect yourself against liabilities, loss, or damage. Consider speaking with an insurance broker to determine the appropriate insurance coverage for your specific circumstances.
Seek Professional Advice: It can be helpful to consult with an accountant, tax advisor, or business advisor to ensure you set up your self-employment correctly and understand your legal and financial obligations. They can provide guidance tailored to your specific situation and help you navigate the complexities of self-employment.
Remember that this is a general overview, and it's important to consult official government resources and seek professional advice to ensure compliance with all legal and regulatory requirements specific to your circumstances. The GOV.UK website provides detailed information on self-employment and taxation in the UK.
