Becoming self-employed is an exciting opportunity to strike out on your own and manage your time and business as you see fit. You can pick up shifts and gigs when you want, build a network of clients and even create your own personal brand.
In the UK there are over 4 million self-employed people earning for themselves and contributing to the economy. Chances are you know someone who’s successfully working as their own boss, which is encouraging stuff. They might be doing graphic design as a freelancer on Upwork, running groceries on JustEat or selling handmade products on Etsy. Which often throws up the question, ‘how do I become self-employed?’.
There’s a few things to consider when it comes to setting up on your own. You’re leaving your usual 9-5 structure, your boss and your colleagues, and you’re going to manage some things for yourself that you’ve never had to consider (like tax!).
If you’re weighing up the options chances are you like the idea of self-employment already. You just need to understand whether taking the leap is something you can commit to.
Some questions to ask yourself are:
If you’ve been through those questions and you’re still certain that the self-employed game is for you then it’s about getting everything in place. We’ve made this checklist to make sure you’re on top of your brand, admin and processes from week 1.
There are a couple of self-employed business structures, which might sound confusing but it’ll be clear which to choose based on your circumstances.
An important part of understanding your circumstances is understanding your finances. And as you have to complete your tax returns yourself or through an app like Earnr you’ll want to know how much to put aside for the tax season each year.
Sole trader - the simplest kind of self-employed business structure. You run your own business as an individual, your personal and commercial incomes are considered one and the same, so you’re taxed as you would a normal income. You can read our blog post here on how much to put aside each year.
Limited company - This is a separate legal entity in its own right. You need to register with Companies House and you also need to pay corporation tax. The benefit is that you pay tax on the revenue from the business rather than the profits you make personally.
Partnership - When you work with one or more others, your status doesn’t change so much from being a sole trader, you still need to register for a self-assessment tax return, and you still pay tax on personal profits, but those profits will be split among all involved. Make sure you agree how you split profits at the very beginning!
In most cases, if it’s just you setting out on your own and you’re going to earn less than around £75k in the year, you can safely opt for the sole trader route. If there’s more than one of you working on a project a partnership might be best. And if you’re earning over £75k and thinking about employing other people, a Limited Company is best.
Earnr can help guide you through the process. If you want to check out the app and put your details in we can get you set up with HMRC right away.
If you’re a sole trader you’ll be taxed in the same way you would if you have a regular salary. You can read about this in more detail in our blog post here.
The band structure for sole trader is:
If you’re a limited company you have to pay corporation tax, which is separate to income tax. Corporation tax is currently 19%. So you’d pay 19% corporation tax for all the revenue your business makes, which is beneficial if you’re generating decent revenue.
Being self-employed can mean anything from being a hairdresser to an engineering consultant, so there’s no one business plan. But once you’re established in all the places you need to be, it should be about getting business no matter what your industry.
Before reaching out, you should identify the channels you’re going to use, whether it’s a specific social media channel, or just letting your friends and family know that you’re running your own business now. (You could work your existing network as much as possible when you start out, it can give you the fastest leads and helps build your experience with people you already know.)
When it comes to pitching and selling, it might sound cheesy, but being yourself is the best way to go. People buy people, as much as they buy products and services, if you get on well with someone they’re more likely to do business with you.
After that it’s about building experience and learning as you go. Which can sound vague but that’s the joy of being self-employed and finding your own methods and processes.
Earnr aims to keep it that way too. We automate the manual bookkeeping process so your finances are kept up to date and you can focus on growing your business. Check out our app that can get you set up instantly.
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