The Pros and Cons of going self-employed

The latest figures show there are currently around 4.2 million people in the UK who are self-employed (Statista 2022).

This number seems to be on the rise, suggesting more people than ever are leaving the traditional 9 – 5 in search of greener working pastures.

The big question is – should you be joining them?

Here’s a rundown of the pros and cons of becoming self-employed to help you decide.

Pros:

1. Control over business decisions

Self-employed workers enjoy autonomy over what happens within their business or sole trader enterprise. Whether it’s investing in new stock, expanding to a new premises or hiring and firing as you see fit – you’re calling the shots.

2. Flexible working

The Covid-19 pandemic has gone some way towards promoting flexible working, but most people still report to management during set hours each day.

As a self-employed individual, you can set your own hours, meaning you can fit your work life around family time, hobbies and other commitments.

3. No boss to answer to

It’s simple – some of us just don’t like being told what to do. If that sounds like you, take the pesky line manager out of the equation by becoming self-employed.

4. Higher earning potential

It can take decades to see any real salary increase in some sectors, even without things like pay freezes making it even harder to get ahead financially.

If you’re self-employed, you don’t need to follow the slow and steady route to the top of your pay grade. If business is good, you can make an uncapped amount of money in a short space of time.

5. A lower tax bill

Being self-employed means you can take advantage of tax reliefs designed to help your business grow. Allowable expenses you can write off on your tax return include anything from marketing costs to transport, travel, uniforms and home office running costs.

Cons:

1. No job security

This is the scary part of becoming self-employed – there’s no safety net. Whether you get work or not is down to you, which is enough to put off those who would rather not have the responsibility on their shoulders.

2. Increased admin and accounting

Self-employed accounting can seem onerous. Between bookkeeping, profit and loss accounts, Self-Assessments, corporation tax and VAT, accounting for self-employed people isn’t for the faint-hearted. Luckily, an online accountant can do the heavy lifting for you, leaving you free to grow your business and enjoy your time off.

3. No employee benefits

Being self-employed means no paid annual leave, sick pay, maternity pay, or workplace pension. These are valuable benefits which, if you work for yourself, you’ll have to arrange elsewhere. A good freelancer accountant will be able to assist you to ensure your business can adequately support you.

4. Tough times hit harder

Redundancy concerns aside, it’s usually salaried employees who feel safer during tougher economic times. This isn’t always true – and it largely depends on the nature of your business – but times like the Covid-19 pandemic can be hard on the self-employed. Government schemes like the Self-Employment Income-Support Scheme (SEISS) helped, but many business owners found themselves dipping into personal savings to stay afloat.

5. The buck stops with you

Working for yourself means you must hold yourself to the highest possible standards when it comes to record-keeping, client relationships and work ethic. This is because everything you do has a direct impact on you and your bottom line, so you’ll need to be the strictest boss you’ve ever had!

Should I go self-employed?

Only you can answer that question. But if you think you’ve got the drive, work ethic and self-discipline it takes to go it alone, then you can expect to enjoy the freedom and rewards that may come your way.

Speak to an accountant about how to get started today.