Deciding to become self-employed can lead to a very rewarding future. It can be a really easy thing to do that allows you to start up and run your own business from anywhere. You could even become a sole trader whilst still working for someone else, this way you can test the waters before taking the complete jump in.
There are certain areas that you need to be aware of and make careful considerations over before becoming self-employed, have a look below at some of the things you need to be aware of:
Registering As Self Employed And Paying Taxes
Once you are set up as a sole trader, you will be responsible solely for paying your own income tax and National Insurance. You must register with HMRC, you have until the 5th October of your second tax year to do this. A tax year runs from 6 April to 5 April of the following year. It’s best to research how to register correctly as it will depend on your circumstances.
It’s important to make sure you file a tax return at the end of the year, called a Self Assessment tax return. You are responsible for completing and returning this every year. If you’re unsure what you need to do then it best to seek the help of Personal Tax Specialists. When opting to become self-employed please remember you will also need to make your own National Insurance contributions.
Do You Need A Business Bank Account?
Your business income will be taxed alongside your personal tax as a sole trader however it is important to keep your business records and finances separate from your personal affairs as much as possible. Dependant on your situation it may be a good idea to open a separate business bank account.
Having a separate business account will also make completing your taxes a lot easier and things will naturally run more smoothly.
The law requires any business to have certain insurance policies in place. The cover that you need will depend on your type of business and the industry that you’re working in. Having the reassurance that you are covered when working as self -employed makes it easier to take the leap into working for yourself too. Most small businesses take out public liability insurance, especially if you are working directly with the public such as in a trade or providing any service. It’s worth researching this further to figure out which cover would be best for you.
In order to be successful as a sole trader, you need to stay on top of your books. You are required to keep clear and accurate records of all your business transactions. Not only will this help with your taxes it will also make it a lot easier to run your business. Having organised paperwork really helps you to reach your goals.
These are just a few of the things that should be considered when thinking about setting up as a sole trader. Do you have any others that you can share in the comments below?