Working as a self-employed or freelancer is becoming popular these days, with many professionals feeling unable to commit to full-time jobs or just wanting to be their own boss.
While this can be a risky move, it can also be great if done correctly. Learn here 6 things to consider when becoming self-employed!
1. Am I becoming self-employed for the right reasons?
Before deciding on becoming self-employed, it's important to analyse if you're doing it for the right reasons.
There are obviously various sources of motivation to become a freelancer, as being your own boss, ditching the commute (although now you can also work as a employee 100% remotely!) or merely having the chance of spending more time with your family or doing your hobbies.
But if this is your case, a good idea might be to ask your employer to have a more flexible work schedule and slowing reducing your work hours while you build up your freelance business. This way, you can minimising your financial worries. Whenever you feel ready, you can becoming a full-time self-employed!
2. Next step? Register with HMRC as self-employed!
After you decide to become a self-employed, the next step is to register with HMRC! Remember that your self-employment doesn't necessarily begin when you start to receive income, but it can start when you begin to incur costs. You will also need to complete a tax return each tax year (we can do it for you!).
Tommy's Tax is here to help you with your tax refund! The process through our app only takes 5 minutes. With our "no refund, no fee" policy, we can check to see if you're owed any money for free!
Using Tommy's Tax app will help you claim the maximum amount possible! On average, people who claim tax returns through Tommy's Tax app earn £3000, which is significantly higher than that they would have claimed themselves!
Track your business expenses & file your tax return with our free app:
3. Will you need to register for VAT as a self-employed?
It depends! If your business has an annual turnover of £85,000 or more, then yes, you will have to register for VAT, which also includes the Making Tax Digital scheme.
4. Opening a business bank account as a self-employee is probably a good idea!
Keeping your business records separated from your personal ones is the smartest move when becoming a self-employed. It will also look a lot more professional to have your business name on the bank details on your invoices! If you still don't know which bank account you should choose, read this article to find out the top business bank accounts in the UK.
5. Do I need insurance as a self-employed?
Yes, as a self-employed you are required to have insurance! The type of business will dictate the insurance you need.
The majority of small businesses will take out public liability insurance which will protect you if a third person injures themselves or if damage is caused to a property because of your business activities.
If you employ any worker, you are required to take out employer’s liability insurance, which needs to cover at least £5 million.
Note that any vehicle used for professional reasons must be insured as well!
6. Keeping financial records accurate and up to date is key
You must always keep financial records of everything for HMRC and also for the health of your business operations. Consider using an online cloud-based accounting software to have everything organised!