Beginning to work for yourself can be a daunting prospect at times, here are some helpful tips to get you up and running including the benefits and pitfalls of self-employment and ensuring that you understand the tax obligations that working for yourself entails.
Is Self-Employment right for me?
There are many reasons for becomming self-employed including the flexibility that working for yourself brings and you may even be able to pay yourself a higher salary than if you were an employee. However there are also downsides and when deciding whether to become self-employed thats a lot to think about.
There are several things to consider before taking the plunge and becoming self employed they include:
• How will you acquire your clients or customers?
• Do you have money to set the business up?
• Can you cope with periods with little to no income?
• Do you feel capable of the responsiblities of running your own business eg. managing cashflow, keeping records and completing the relevant tax returns?
• Are you aware that you are losing the benefits of an employee eg. holiday pay, statutory sickness benefits and employer pension contributions?
• Will you feel comfortable working on your own and not having any colleagues?
• Do you have the necessary space and equipment to carry out your business or will you will you need to budget to buy it?
• Do you have any responsiblities away from work that you need to take into account, eg. new baby, moving house etc.?
Advantages of becoming Self-Employed
There are many benefits of being self-employed and working for yourself, these include:
• Gives you more flexibility and control allowing to fit work around other commitments responsiblities eg. childcare.
• Your work can be varied working on several different projects for different clients at one time.
• You have the ability to deduct certain costs (including travel and utlities) from your income for your tax liablity.
• Allows you the ability to be more creative when building your business up.
• Depending on the industry you may be able to earn more money working for companies as a consultant or freelancer.
• Means you can work from you own home, or from your own work premises.
Disadvantages of becoming Self-Employed
Alongside the benefits of working for yourself there are also many downsides to self-employment aswell including:
• Initially can be challenging to acquire clients and trying to find a route into the market.
• Could involve some start up costs, which will require some money to get your business up and running.
• Could potentially be difficult to keep up with regular payments (mortgage/rent, loan repayments, living expenses) with your income not being guaranteed.
• You won’t have any back up should things go wrong, you will be completely responsible for the businesses success or failure.
• No employee benefits including holiday and sick pay.
• There may be implications when applying to rent or buy a property when you’re self employed.
• Working alone may be isolating and lonely
• You are responsible for the administration side of the business including bookkeeping and complying with all legislation and regulations.
It is worthwhile to take a moment and assess if you have taken all the benefits and pitfalls of working for yourself into consideration before becoming self-employed.