If you’re thinking about becoming self-employed, it’s essential that you’re aware of your legal responsibilities and the practical aspects of being your own boss. Self-employment allows for a great deal of creative freedom and can make your working life much more varied and challenging. If you have that all-important entrepreneurial streak and think that starting a business or setting up as a competitive freelancer is for you, make sure that you’re well-informed about what the process will require.
How do You Plan to Trade?
The first thing you should think about is how you plan to trade as a self-employed person. If you’re working for yourself, you count as a business in your own right. Your business could take one of three legal forms and you should choose which one is most appropriate for your needs. Becoming a sole trader is the simplest way of starting a business, but if you feel like you need some extra support, you may wish to form a partnership, which means that two people run the business. You may also be interested in turning your business into a limited company, which gives the business a completely separate identity from the people who operate it. Accurate and detailed records of your business must be kept, whatever form it takes. However, if you choose to trade as a limited company, it’s likely that you will need the help of an accountant.
Income Tax and VAT
Self-employed workers are responsible for paying their own income tax on any money that is earned. You may need to employ someone to help you do this, or you might choose to become part of an umbrella company that will allow you to keep as much of your pay check as possible. There are plenty of online calculators available to help you work out how much you’ll be taking home. If you’re newly self-employed, you should register with HM Revenue and Customs to be eligible for special tax reliefs and allowances. Whether or not you pay VAT is dependent on how much money your business earns and the kind of product or service it sells.
You will also need to decide on where you plan to conduct business. Business rates must be paid on commercial properties, including shops, offices and warehouses. If you plan to work from home, you may also have to pay business rates, depending on whether the Valuation Office Agency has given a rateable value to part of your home.
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