Business Advice

How to Become Self Employed

Business Advice | 3 July 2023 | 10 months ago

A lot of people make the mistake of thinking that becoming self employed is a complex and stressful task, but that couldn’t be further from the truth. In this blog, we have taken a look at the process of becoming self employed, and the pros and cons of doing so.

How to Become Self Employed?

  • Choose a Business Idea and Conduct Research – There are a lot of careers that allow you to be self employed, so identify the type of self employed work that you wish to pursue. Consider your skills, interests and market demand to select a viable business idea. It’s also a good idea to conduct thorough market research to understand your target audience, competition and potential demand for your products or services. This will help you refine your business idea and develop a solid business plan.
  • Register as Self Employed – Before you can begin working as a self employed individual, you need to register with HM Revenue and Customs (HMRC). You can do this online through the HMRC website or by calling them, and the process is relatively straightforward. Registration will ensure that you are properly taxed and that meet your legal obligations.
  • Set Up as a Sole Trader or Limited Company – When you become self employed, you need to decide whether to be a sole trader or a limited company. A sole trader is a self employed individual who is personally liable for the business’ debts, while a limited company is a separate legal entity that offers limited liability protection to shareholders. There are pros and cons to each, which is why it’s important to weigh up which route works best for you.
  • Organise Your Accounts – As a self employed worker, you will need to maintain accurate records of your income, expenses and taxes. You could use accounting software or hire an accountant to help you manage your financial records, but many self employed people choose to handle the financial side of things themselves. You also need to make sure that you understand your National Insurance obligations. When you are self employed, you’ll be responsible for paying Class 2 and Class 4 National Insurance contributions.

Should I Become Self Employed?

There isn’t a set answer to whether you should become self employed, as there are a multitude of factors to consider. Becoming self employed works well for a lot of people, and there are a lot of benefits to doing so. However, others find it to be a more difficult way of managing their career, as it requires a lot more input in regards to managing workload, invoices, paying income tax and sourcing work.

How to Decide if Becoming Self Employed is the Right Decision

Deciding whether to become self employed is a personal choice that depends on various factors, including your skills, financial situation and career goals. It’s a possibility for a lot of industries and sectors, but it works better in some than others. Consider factors such as the flexibility and independence of being your own boss, the potential financial rewards and risks, the need for stable income, and your ability to handle the responsibilities of running a business before making a decision.

What are the Benefits of Being Self Employed? 

Flexibility – When you are self employed, you have the freedom to set your own schedule, choose your clients or projects, and work from any location. This flexibility is rarely an option if you have an employer.

Independence – You are your own boss when you become self employed, meaning that you make all of the decisions and you have full control over your workload. It gives you the chance to take your career into your own hands and take it in a direction that works for you.

Potential for Higher Income – As a self employed individual, you might find that your income potential is greater, as you have the ability to set your own rates and take on more clients or projects. You are limited to asking for a pay rise or waiting for a promotion.

Variety of Work – Self employment often allows for a greater variety of work experiences and opportunities to explore different areas of interest. You can pick and choose your projects, and you have the freedom to make things as varied as possible.

What are the Negatives of Being Self Employed?

Irregular Income – One of the biggest downsides to being self employed is the possibility of irregular. Your income could be less stable compared to being an employee, with fluctuations and uncertainty in cash flow. This is because there is no guarantee of work, and your earnings can change monthly.

Responsibility for the Business – As a self employed worker, you are responsible for handling all aspects of the business, including marketing, administration, finances, and customer acquisition. When you have an employer, this is taken care of for you.

Long Working Hours – Being self-employed often means longer working hours, especially in the early stages of establishing your business. There’s no one to handle payments, corresponding with clients, finding work and keeping on top of accounts. These are time consuming tasks.

Lack of Benefits – Unlike traditional employment, self employed individuals do not typically receive benefits such as sick pay, maternity or paternity leave, holiday pay and employee benefits, unless you arrange them independently.

Increased Risk – When you are self employed, you are solely responsible for the success or failure of your business, as well as any associated financial and legal risks. This can be stressful, especially when you first start navigating the world of working for yourself.

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