Considerations for the Newly Self-Employed
15th April 2016
My name is Rachel Armstrong, and I work for James Scott, the leading Chartered Certified Accountants in Middleton, Manchester.
I’ve worked with people who are Self-Employed for more years than I care to admit. I’ve also spent several years without the constraints of a boss or a 9-5 contract. So what have I learned in this time about the typical Self-Employed person? Basically, there isn’t one. I am yet to meet two who are alike, who have the same plans or goals, the same education, abilities or experiences.
The Self-employed workforce in the United Kingdom is at an all time high and I have met many people recently who have just made the leap, or are seriously considering it. There is no doubt it’s both exciting and terrifying.
My advice to anyone taking this leap is as varied as the people themselves, but my experience has given me a lot of insight into potential pitfalls and aspects that many have not considered. It’s very easy to get caught up on small details without getting a clear image of the bigger picture. A problem I’m sure we are all guilty of during any times of a big change in life.
So where do you start? Before you go any further, it is imperative that you give yourself time to consider all of the hidden costs and time constraints. This shouldn’t be done while stuck in traffic, or sat on the loo. Set yourself a few hours in an office or a quiet room and list out all the costs, administration duties and legal responsibilities, and answer questions such as:
- How much time will you need to devote to researching customer bases, marketing plans, administration, meetings with the bank, stationery design? (Time should be budgeted as carefully as financial costs.)
- What start up capital do you need? Our Start Up Calculator will help.
- If you need a new vehicle, now is the time to think about finance costs and the most tax efficient types of vehicles. (I would always recommend a van rather than a car if at all possible.)
- Will you need Public Liability Insurance or income protection policies for if you fall ill?
- Have you considered budgeting for tax liabilities and accountancy fees?
And now, the main reason we accountants are here, the daunting prospect of accounting for your finances, dealing with Tax, National Insurance, and VAT. If the idea terrifies you, you are not alone. Many people find the whole prospect daunting and incomprehensible. I can wholeheartedly promise you, it is not as bad as you think.
If the thought of entering all your finances onto a complicated computer accounts program seems like the stuff of nightmares, then keep away from them. Your book-keeping needs depend entirely on the type of business you are running, and in some cases a small spreadsheet or handwritten books are all that are needed.
First and foremost, you should register with HMRC as soon as you become Self-Employed. https://www.gov.uk/set-up-sole-trader/register.
You should be aware of when you would need to register for VAT and keep a constant eye on your turnover. Take a look at our Introduction to VAT for lots of current information.
When considering your book-keeping needs, it is important to think about your future plans. Once you have systems in place, it can be an upheaval starting again. If you are working on your own at the moment, but intend to start employing staff and expanding the business, it is worth buying suitable software to control your debtors and cash flow. This means that as the business grows, you have the capability to grow your book-keeping systems along with it. I really would recommend having a chat with someone who is experienced in these things. Your mate in the pub may swear by his system, but they probably run their business in a completely different way to you.
I would never push anyone into taking the services of an Accountant. If you are confident with taxable income and expenditure, and of your responsibilities, HMRC now make it very easy to complete your own Self Assessment Tax Returns online.
At James Scott, the amount of support we give our clients is as varied as the clients themselves. We can hold your hand through every step of the business by visiting and assisting on a daily basis. We can meet up once every year to check through your figures and have a chat about any changes in your circumstances, current legislation, and items you may not have considered. And, we can offer everything in between.
Of course I could talk all day about other things you may need to consider, but many won’t be relevant to you. Bear in mind that as you are Self-Employed, you won’t have any paid holidays, sick leave or job security. You should consider your pension requirements. If you plan to take on staff you must register as an employer, and be confident your legal responsibilities. If you’re in the Construction Industry you may need a CIS Card, and if you plan to use subcontractors, you will need to register this with HMRC.
We at James Scott are here to help with all these matters and more. No question is a silly question when it comes to dealing with your financial and tax affairs, so never be worried about asking for a little bit of help and advice. Contact us and we will be glad to help you