Many people have plans of becoming self employed at some point in their working lives, for many it remains just a dream while others go down the road to becoming their own boss and working the hours they want to work. For anyone wanting to know how to become self employed, follow this guide.
There are five things you must do by law when becoming self employed
Once you become self employed, you must register yourself as such within the first three months to the HMRC if working within the United Kingdom. You will become liable for paying your own income tax and national insurance premiums. Registering is easy and can be done online or through a free phone number. VAT
If you expect your business to turnover 73,000 GBP( at 01.04.2011) or more over the next 12-month period, you must register for VAT. If this figure seems unlikely at first and you will reach it later in the financial year, you have to register within 30 days or face a fine. The threshold rises by a few thousand pounds each year. Should you register and not reach the threshold you can claim the VAT back. A business bank account
It is vitally important that you keep you business account separate from your personal finances.
Keeping accurate records
You must keep clear and accurate records from day one of trading as self employed of all your business transactions. This is to your benefit to keep the tax authorities on your side as well as keeping your business organised and up to date. By having everything up to date it will mean your quarterly return for VAT (if applicable) and your annual self assessment tax return are able to be completed relatively easily. Insurance
You are required by law to be insured. Depending upon the industry you are in, this will govern what type of insurance is required. If you employ other workers, you are obliged to take out employers liability cover. Many small businesses also cover themselves with public liability insurance, especially if customers come to your premises or you complete work on theirs.
Some other factors of self employment
Length of the working day
Many self employed people work twice as many hours as workers receiving a regular wage.
There is no paid holiday entitlement for the self employed, you will only get paid for the completion of a task allotted to you. So, there could be large periods of time between payments.
Starting out as self employed
It is relatively easy to become self employed, you can even become a sole trader while working for someone else before you completely commit yourself to the route of self employment.