If you start to work for yourself, you will be classed as a sole trader. This ultimately means that you are self-employed. Working for yourself may seem quite anxiety provoking if you have never done it before but with hard work and commitment being self-employed could pay dividends.
Setting up and Getting Started
Setting yourself up as a sole trader is relatively easy. You will need to:
- Determine whether being self-employed is the right thing for you – Would you prefer to have a guaranteed income every month while working for someone else?
- Check what being self-employed actually means – You may want to consider setting up your business as a private limited company or a business partnership instead.
- Decide which name you would like to trade under – The name you choose must not be a trademarked name or offensive.
- Understand which records you need to keep – Business expenses, PAYE records, sales and income and records that relate to your personal income.
- Register for tax – You will need to register for Self-Assessment online.
Types of Businesses
Those who are self-employed have created many different types of businesses. For example, you could work as a self-employed builder, gardener, writer, singer, business consultant etc.
Running your Business
You are self-employed if you do the following:
- You run the business by yourself
- You are responsible for your business’s success and failure
- You can have more than one customer at a time
- You can make a decision about how you work
- You can make a decision about where you work
- You can make a decision about when you work
- You can hire others at your expense to work for you or help you work
- You provide the most essential items of equipment that are needed to do your work
- You are responsible for completing any unacceptable work in your own time
- You can charge a price that has been agreed
- You sell services or goods in order to make a profit
Selling Services or Goods
Anyone who sells services or goods is a trader, and if you are trading you are technically considered to be self-employed. Those who work as a trader do the following:
- Regularly sell in order to make a profit.
- Make items in order to sell them for a profit.
- Sell goods online, through classified advertisements or at car boots regularly.
- You are paid for a service or some goods that you provide.
- You earn commission by selling products for someone else.
Registering as a Sole Trader
If you are self-employed and you work on your own, you might have to register as a sole trader. You can typically keep the profit that you make from your business after you have paid tax on the profit.
You can register as a sole trader if you:
- Earned more than £1,000 from your self-employment in the last tax year.
- You need to prove to another organisation that you’re self-employed so you can claim tax free childcare, for example.
- You wish to make (voluntary) National Insurance payments so you qualify for some benefits.
If you register as a sole trader it is imperative that you keep records, more specifically, your sales and your expenses. You will also need to complete a Self-Assessment tax return when asked by HMRC. Lastly, you will need to pay income tax on all of your profits and Class 2 along with Class 4 of National Insurance.
You will need to register for VAT, but you will only need to do this is your annual turnover is more than £85,000.
If you are working within the construction industry you will need to register with the HRMC. There is a Construction Industry Scheme you’ll need to sign up to if you’re a contractor or a subcontractor.
Advantages of Working for Yourself
There are many advantages of working for yourself some of them include:
- You can work flexible hours: Would you like to work 9 to 5 on Monday and 10 to 3 on Tuesday? You can. You can work flexible hours that suit you and any deadlines that you have. Would you like to work late into the night or start in the early hours of the morning? You can.
- You can work from almost any location you wish: There are a few limits as to where you can work depending on the job you do, but you won’t be tied to one site.
- You’re the boss: The only person you have to answer to is you, and a lot of satisfaction can be gained from this.
- You can take an afternoon off if you please: Want to have a quiet afternoon away from work? If you feel like taking the afternoon off and you don’t have an immediate deadline you can take the time off.
- You have a lot of freedom: Working for yourself gives you a lot of freedom to work when and where you wish. If you want flexibility in your work.