Being your own boss is a freedom which leads many into the contracting business. With less legislative requirements then operating via a limited company, often being a sole trader is a more hassle-free option, however, it also generally means less take home pay than a limited company contractor as it can be less tax efficient. If you have decided that the sole trader route is right for you, we have provided you with a brief guide on how to make it happen;
- Register as a sole trader with HMRC in order to be considered self-employed. You can do it yourself but we also offer free set up as a sole trader for our clients so you can be safe in the knowledge that all the boxes are ticked.
- Set yourself up for Class 2 National Insurance Contributions. This can be set up as monthly or 6 monthly contributions via direct debit.
- Set up a separate bank account for business use. This is not a legal requirement, however, is important to ensure your accounts do not get confused with your personal ones. It does not have to be a business account, but can be an unused personal account (excludes ISAs).
- You may require business insurances as part of your contract, although these are recommended regardless of contractual requirements. Professional Indemnity and Public Liability insurances are the most common.
- You may wish to consider maintaining a PAYE position either full or part-time whilst getting your business off the ground. Assess your financials before quitting entirely.
- You are going to need to start selling yourself as a business in order to get some clients. You may wish to consider having some professional business cards printed, a simple website set up, joining LinkedIn and attending networking events. You will need to maintain presence on and offline for effective marketing.
- Once you have started trading, have made your first expense or need to raise an invoice, for example, you will need to start keeping accurate records of your accounts, in order to avoid a lot of hassle when you need to submit your accounts to HMRC. This is where you may wish to find a suitable accountant or, should you be more inclined to do it yourself, use bookkeeping software such as FreeAgent.
- When you start trading full time, you will need to consider financial planning. Without employment, you will need to take extra consideration to potential unforeseen circumstances, such as having an accident. You might want to consider life and critical illness insurance or medical and health protection for should the worst happen.
All you will need to do now, is ensure you submit your Personal Tax Return at the end of the year, but your accountant can do that for you, so you’re ready to start trading.
Chancellor announces that IR35 reform will be scrapped
IR35 reform in both the private and public sectors is to be repealed, the Chancellor announced in the mini Budget, held on Friday 23rd September.
This surprise development made up just one of many welcome tax changes, as Liz Truss’s new-look government promised to start “a new era” and unleash the potential of UK business.
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It’s an often-quoted statistic that around 60% of businesses fail in their first three years – with 20% folding within just twelve months.
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