Going self employed? Here’s what you need to know!
Many of us dream of being our own boss. We fantasise about early Friday finishes, holidaying when we like and even choosing to stay in bed for an extra hour or two on a Wednesday morning!

More realistically, one of the main benefits of becoming self-employed is the ease with which you can start up and run your new business. You can even become a sole trader whilst working as an employee for someone else, so you can test the water and see if you’re suited to working for yourself.

From a financial point of view there are a few things you need to make sure you have covered before your self-employed journey gets going.

Sole trader vs. limited company

First things first, you need to make sure trading as a sole trader is the right approach for you. A limited company does what it says on the tin - it limits the amount of liability, so if the company gets into financial difficulty then it is contained within the company and won’t put your personal assets at risk. However, there are more financial responsibilities being a Company Director, compared to a sole trader, so it’s always advised to work closely with an accountant.

That said, it’s just as important to have an accountant as a sole trader. Your accountant will make your life easier by dealing with HMRC for you. At Hargreaves Owen, we make sure you don’t pay a penny more in tax than you have to and when the business grows, we can advise on the best structure going forward.

Getting set up as a sole trader

Register as self employed with HMRC. You’ll need to start submitting an annual self- assessment tax return with your company figures.
Tip: We can help you complete your personal tax return in plenty of time of the 31st Jan deadline. This will tell you in advance how much tax you owe so you can budget for it.

Find out if you need to become VAT registered
Tip: If your VAT taxable turnover goes over the £85,000 threshold, or you know that it will, you’ll need to prepare and file VAT returns. We can help with this, just like the self-assessment returns.

Keep accurate accounts
Tip: Even if you are not VAT registered, it’s important to keep your books up to date with an easy to use online bookkeeping package. We can help ensure you make a claim for everything you are entitled to while staying on the right side of HMRC - from travel to meetings to some utility bills.

Open a business bank account
Tip: Even if you’re just testing the water and have one or two freelance clients while still employed elsewhere, having a separate bank account will keep everything much cleaner.

Make sure you are properly insured
Tip: You should typically consider professional indemnity insurance and public liability insurance, but there are plenty of other covers too. Get the right ones for you.

Be aware of any employer responsibilities
Tip: If you have any employees you will need to have a payroll scheme set up and submit Real Time Information (RTI) to HMRC. We can help with this and with Auto-Enrolment pension contributions. See our payroll blog for more information.

Don’t forget about your own pension - planning is key!

Other important things to consider

Be money-savvy: With no regular wage coming in, make sure you’re careful with your overheads. It can be tempting when you start to buy what you need all at once, but that society membership, software package and new laptop all take a huge chunk out of your first months’ earnings.

Go networking: One of the downsides of working for yourself is being by yourself! There are so many networking groups you can join, or drop into as a one-off, as well as a growing number of online support groups for that odd techy question, or just for a virtual chat with like-minded people. You could also consider a co-working space if you miss the office atmosphere.

Set up your office: It doesn’t have to be elaborate, but a dedicated space with a clear desk will do the world of good against the inevitable distractions of working from home. And it’s something to walk away from at the end of each day!

Get organised: A weekly planner is essential. Keep a ‘to do’ list and update it at the start and end of each week, prioritising tasks as you go.

You and HMRC

It can be daunting to go from being employed with your tax deducted at source, to being responsible for every penny going in and out of your work account. Most accountants, ourselves included, act as your agent so we deal directly with HMRC on your behalf.

If you are unfortunate enough to be the subject of a tax investigation we will be there for you. Plus all new clients are offered 12 months free cover with our Tax Compliance Insurance policy.

Good luck on your self-employed journey and remember we offer a full range of services for sole traders and partnerships - find out more here or get in touch for a chat.

Get in touch - If you'd like to find out more about how we can help you and your business pay less tax, generate more profits and create long-term wealth for you and your family, please get in touch now