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As above... Are there any pitfalls for a self employment virgin???
Are there any pitfalls for a self employment virgin???
Lots of pitfalls - many benefits too!
What exactly are you thinking of?
As long as you keep the tax man happy its not that hard.
not getting holiday/sick pay sucks
I've just become a flat rate VAT LTD company. My accountant has said I'll save a hell of a lot over PAYE (even normal sole trader)
You will be "at Work" pretty much 168 hrs a week!!!! If you`re LTD then a small wage and the remainder as a dividend!!!
cons:
no pension contribs
no sick pay
no death in service
you have to sort out your own tax, income and NI.
Pros:
lots of things can go through or inflated as 'expenses' so you can end up paying less tax than on the same income as paye. This is morally questionable of course.
Ok im currently an employed cabinet maker but looking to go s.e... Have a chance to work helping another cabinet makerfor 3 days a week on to be agreed pay... Leaving 2 days to concentrate on my own work with a view to doing less for the chap & more for myself as time goes on?
In that case I'd start out as a sole trader. You just need to tell the tax man and that's it, so minimal fuss. You then invoice the chap you are working for and he pays you, nice and easy, it can go into your personal bank account. At the end of the tax year fill in your self assessment add up all you income, subtract all your legitimate business expenses (tools, materials, workshop, phone, travel, etc) and pay the income tax on the profit. As business picks up it might be more tax efficient to look at VAT and Ltd but I'd start simple.
I've been thinking of doing the same. Some useful advice. Thanks.
Potentially looking at this myself,
Are there any books that anyone would recommend?
I'm far from academic and worry I'd struggle with the paperwork side.
Taking a sick day will become a thing of the past!
Tacopowell mate from what ive been told over last few days its fairy simple but is helpfll if you have a friend who can guide you... Not to mention our good friends on here!
Zippykona i get nothing for being sick as it is..
Find a good accountant & have a chat with them about your situation.
Also get them to show you what paperwork is due & when. This will help you to budget when tax/accountant bills are due & also help you avoid any fines..
Agree with nickjb about keeping it simple & starting as a sole trader. If you've no experience in running a business you'll be on a learning curve with all the paperwork.
Don't allow an accountant to push you into going ltd before it's right for you. They get a lot more money out of you if you're ltd & the fines if you get things wrong are on a totally different level than a sole trader.
Good luck!
Tax. Self-assessment. Class 2 NIs (c. £10 // month) and then Class 4 (9 %) on your tax.
Keep records. Look at use of home for business purposes. Don't under-sell yourself ..
To be fair I had a query about Ltd. Co. status and even just getting sole trader accounts done with local accountants. Not one of them pushed to do my accounts, and none pushed the Ltd. Co. route..
Wow thanks guys... Chap has agreed a daily payment for 3 day a week just gotta be 100% sure then go tell boss
One thing to remember is once your Turnover reaches the threshold of £81000, you must registered for VAT.. Sometimes if you do a lot of business to business trading it may be beneficial to voluntary register before that.
One thing to remember is once your Turnover reaches the threshold of £81000, you must registered for VAT.. Sometimes if you do a lot of business to business trading it may be beneficial to voluntary register before that.
Make sure to put as much distance as you can between yourself and your new client - IR /may? look on it as an employee in all but name - if you know it's not like that then fine, easy ways to mitigate this include providing your own tools, having the ability to turn work down (from him) and take on other work (i.e. find other clients). Also to be able to choose your own hours helps, as may - may - taking the VAT registration route (though I'd maybe hang fire on that at first).
You may be able to find a friendly local accountant to bounce ideas off for nought or very little - a small account might not be worth their while in early days, they then can be there when you grow and have need of them.
Good luck! I haven't regretted being s-e really - couldn't have done it in my younger days but it's perfect now ::)
Get an accountant, as said above, he will guide you.
Mine is a great asset, you might think you know the rules but they change all the time, he saves me loads.
+1 for good accountant, they will advise you to go sole trader or limited etc.
I have been happy with Barclays business account, occasionally they try sell you stuff but they have loads of tips and are always helpful.
DON'T GET A CREDIT ACCOUNT WITH ANY SUPPLIER!!!!
Unless your good at managing it, stuff adds up quickly.
Get full payment for all material up front.
Avoid delayed payments. Get paid on completion our at the end of the week if its a big job.
Keep money aside for the tax man!
Pay yourself a reasonable salary and stick to it.
As long you enjoy your skill you should fly.
3 days a week for one employer is tricky - HMRC will want you to be employed by them. As above it can be mitigated by working different days, bringing own tools etc but if it's 3 days every week then you should really be PAYE. I wouldn't have thought you would have an issue as you'll be fairly small fry in their eyes but it's something to be aware of.
Also make sure if you are self employed your new employer is paying enough. You're saving them around 35% of the equivalent salary cost and you're losing sick pay, holiday entitlement, pension contribs from next year etc. so set your rate high enough to cover all this. For part time work sometimes you can lose out by going self employed instead of PAYE depending on your salary as the majority of your earning could be tax free anyway.
DON'T GET A CREDIT ACCOUNT WITH ANY SUPPLIER!!!!
Unless your good at managing it, stuff adds up quickly.
Hmm, or, you could say, rather than multiple small bills, I'll just pay one at months end, helps paperwork, less time involved, easier to get stuff ordered/delivered, posbibility of lower prices from the supplier.
If you cannot budget to pay monthly bills, you shouldnt be running a business.
Get full payment for all material up front.
Right. Try it yourself - "This job will be £3k for your kitchen materials, so if you give me that now, I'll get it ordered, and see you when it is ready".
You won't be in business long, as no-one will pay upfront.
Avoid delayed payments. Get paid on completion our at the end of the week if its a big job.
Again, difficult to achieve. Terms and conditions may state immediate payment, the customer will see it differently. For a big job, you want staged payments, so if things do go wrong, at least you will not be waiting for the full amount to get to you.
Keep money aside for the tax man!
Pay yourself a reasonable salary and stick to it.
Keeping savings for your tax should be a priority, but in real life, unless you are making a good profit, the tax goes on the backburner and is paid each January/July when it is due from the current account, rather than savings.
One man traders are very difficult to keep a steady year round income, so paying a regular wage is generally not done, but it does make sense to not spend you £3k this month when there is no work booked in for the following month.
The one thing I would do differently is to make sure I had built up loads of potential customers and feathered my nest BEFORE handing in my notice.
Sounds like you have that in hand already, but don't underestimate how much time it can take for income to pick up.
Best thing I ever did, despite that. Good luck.
have a look at www.gov.uk lots of free advice there about starting self employment, free courses etc, avoid big accountants try a local lady or chap who does accounts, theyre a lot cheasper, keep all receipts, file stuff away, keep a diary,spend frugally, save money, intrest free credit card is your freind, expect not to get paid every so often, bounced cheques,silly excuses, faults in job etc etc.
Clean van and tidy toolbox and workshop inspitre confidence as do clean clothes, no rips or covered in paint etc.Quite a few fellow tradesmen dont seem to have got that idea yet.
Being blunt if you can't manage credit accounts with suppliers you can't run a business.
As your business grows you will welcome the ability to have suppliers that give you credit. If you are sharp on delivery dates etc you can get paid for the work before you have to pay for the materials. Obviously this all depends on what terms you have from the suppliers.
Think about what credit terms you will give your customers too. Don't be shy about asking for a deposit, if they object to a deposit will they be able to pay the full bill?
And as above invest in some good quality workwear. I had a load a polo shirts, fleeces and jackets for my company and was amazed how cheap it was.
no-one mentioned IR35 yet?
( or at least not explicitly ). look in to this as I think you may fall foul of it if you're not careful.
Massive help guys thanks!
Doing the same - you might want to look into the "contracting" thread. As advised I've got SJD involved and they're really holding my hand.
I've been doing my own accounts for 5 years, very simple. Vat reg - don't concern yourself! Sole trader without staff unlikeoy to exceed 81k. 3days/employed status - don't concern yourself, especially as you plan to wind this down. Feel free to email me if you want any specific stuff.
Be smart, be reliable. Don't be afraid to say no. Charge per job not per hour and you can double your income. Don't work 7days a week (I'm prob averaging 35 inc admin).
Be confident and good luck.