Becoming Self Employed

[nakedninja]

Hello all,

the search function is down, so apologies if this has already been covered, but I'm considering (very seriously) becoming self employed.

Has anyone got any recommended reading, good starting points for the legalities of it all? Stuff on 'becoming self-employed' is all well and good but I'm more concered about the slightly more difficult things; registering a company name, doing my own accounts, the ins and outs of being your own boss, etc.

Any info is very welcome and I'm sure its probably the wrong financial climate for self employment, but we'll see.

Thanks in advance.

[Eric Mc]

Are you going to be Self-Empoloyed (as you intimate) or are you planning on setting up a Limited Company?

If the latter - why?

(And this should reall;y be in the "Business" forum).

Edited by Eric Mc on Thursday 11th June 16:28

[UpTheIron]

Eric is PH's resident expert, and there are plenty of others who can help with lots of free advice.

However we need a bit more information first. What is / will be the nature of your business and who will your customers be? Will you be a sole trader or will you be an employee of a limited company that you own?

For example, I own a Limited Company and I am an employee of that company - I am not "self employed". The legislative and taxation rules and requirements are completely different for my company compared to - for example - a self employed plumber.

[asbo]

UpTheIron said:

Eric is PH's resident expert, and there are plenty of others who can help with lots of free advice.

However we need a bit more information first. What is / will be the nature of your business and who will your customers be? Will you be a sole trader or will you be an employee of a limited company that you own?

For example, I own a Limited Company and I am an employee of that company - I am not "self employed". The legislative and taxation rules and requirements are completely different for my company compared to - for example - a self employed plumber.

Is there actually any benefit these days to being self employed - as opposed to Limited Company?

[JonRB]

asbo said:

Is there actually any benefit these days to being self employed - as opposed to Limited Company?

Oh, definitely. The costs of running a Limited Company are far higher than being Self Employed.
Although, of course, you do have unlimited liability as Self Employed so it's swings & roundabouts.

[asbo]

JonRB said:

asbo said:

Is there actually any benefit these days to being self employed - as opposed to Limited Company?

Oh, definitely. The costs of running a Limited Company are far higher than being Self Employed.
Although, of course, you do have unlimited liability as Self Employed so it's swings & roundabouts.

Which as a plumber copuld be potentially ruinous non?

Do SE's pay corp tax?

[JonRB]

asbo said:

Do SE's pay corp tax?

Of course not. Why would a private individual have to pay a company tax?

[asbo]

JonRB said:

asbo said:

Do SE's pay corp tax?

Of course not. Why would a private individual have to pay a company tax?

I couldn't remember whether SE had any ties to 'being a business' if you will.

Forgive me.

[JonRB]

asbo said:

Forgive me.

Nothing to forgive! Sorry if my response came across as anything other than friendly.

[Eric Mc]

asbo said:

JonRB said:

asbo said:

Do SE's pay corp tax?

Of course not. Why would a private individual have to pay a company tax?

I couldn't remember whether SE had any ties to 'being a business' if you will.

Forgive me.

Self Employment definitely DOES have "links" to being a business. In tax law, it IS looked on as running a business, or as the tax rules normally state, "trading".

Self Employed individuals (or sole-traders) pay Income Tax and Class 4 National Insurance on their annual business profits and they pay a regular flat rate monthly or quarterly amount of Class 2 National Insurance.

The basic Income Tax rules are essentially the same for everybody. However, there are specific differences in the type of expenditure that can be cliaimed against business income.
There are also specific rules regarding what happens when a business makes a loss rather than a proft.
The payment of Income Tax on Self Employment is also very different - being collected under the Self Assessment system. This does require, of course, the completion of a Self Assessment tax return every year.

Edited by Eric Mc on Tuesday 16th June 08:29

[nakedninja]

Interesting, and interesting.

A limited company, eh? Perhaps that fits the bill more, as that is the further future plan.
It would be a creative media company, with a few of us doing those types of things (I'm not going to tell you what as I get enough ridicule at home).
Our customers would be production companies and other entities in that vein.
This is where I would eventually like to take the company so starting now is a great idea and boost.
All of your input and advice is welcomed, even if it is in the wrong forum!

[Eric Mc]

If you are confident that the activity will grow rapidly and start generating a good income in a reasonable amount of time, then leapfrogging the individual "sole-trader" stage and going straight to a limited company might be appropriate.
As was mentioned earlier, limted companies create about four times the bureaucracy and at least twice the professional costs as operating through a similar sized sole tradership.

[JonRB]

Eric Mc said:

As was mentioned earlier, limted companies create about four times the bureaucracy and at least twice the professional costs as operating through a similar sized sole tradership.

Indeed. And with Sole Tradership you can be a little bit more lackadaisical with the money since you are a single legal entity. So, for example, if you have an Offset Mortgage you can keep your operating capital in there to great benefit.

As a one-man Limited Company, youself and your company are separate entities and the concept of "my money" and "my company's money" have to be kept very separate and you can't just, say, keep money in your Offset Mortgage as that is technically embezzlement (or, before Eric corrects me, it can overdraw the Director's account)

Anyway, the point being that not only does it cost more in money to run a Limited Company, it also costs more in time, effort, hassle, adminstration, and being diligent.

[ewenm]

You might find that the companies you're targetting as customers won't deal with you unless you're operating as a limited company. It may be worth checking with their procurement/legal/contracts departments.

[V8mate]

ewenm said:

You might find that the companies you're targetting as customers won't deal with you unless you're operating as a limited company. It may be worth checking with their procurement/legal/contracts departments.

Exactly. Very hard to do business-to-business work without being a Ltd company and VAT-registered these days.

[asbo]

Eric Mc said:

asbo said:

JonRB said:

asbo said:

Do SE's pay corp tax?

Of course not. Why would a private individual have to pay a company tax?

I couldn't remember whether SE had any ties to 'being a business' if you will.

Forgive me.

Self Employment definitely DOES have "links" to being a business. In tax law, it IS looked on as running a business, or as the tax rules normally state, "trading".

Self Employed individuals (or sole-traders) pay Income Tax and Class 4 National Insurance on their annual business profits and they pay a regular flat rate monthly or quarterly amount of Class 2 National Insurance.

The basic Income Tax rules are essentially the same for everybody. However, there are specific differences in the type of expenditure that can be cliaimed against business income.
There are also specific rules regarding what happens when a business makes a loss rather than a proft.
The payment of Income Tax on Self Employment is also very different - being collected under the Self Assessment system. This does require, of course, the completion of a Self Assessment tax return every year.

Edited by Eric Mc on Tuesday 16th June 08:29

Thank you Eric, most useful.

I've been operating as a one man Ltd Co for 6 months now. However, I have an accountant to sort out the sums, because I am quite simply clueless when it comes to these things.


ETA: Because today I am also seemingly useless at spling.

Edited by asbo on Tuesday 16th June 16:53

[Eric Mc]

asbo said:

Eric Mc said:

asbo said:

JonRB said:

asbo said:

Do SE's pay corp tax?

Of course not. Why would a private individual have to pay a company tax?

I couldn't remember whether SE had any ties to 'being a business' if you will.

Forgive me.

Self Employment definitely DOES have "links" to being a business. In tax law, it IS looked on as running a business, or as the tax rules normally state, "trading".

Self Employed individuals (or sole-traders) pay Income Tax and Class 4 National Insurance on their annual business profits and they pay a regular flat rate monthly or quarterly amount of Class 2 National Insurance.

The basic Income Tax rules are essentially the same for everybody. However, there are specific differences in the type of expenditure that can be cliaimed against business income.
There are also specific rules regarding what happens when a business makes a loss rather than a proft.
The payment of Income Tax on Self Employment is also very different - being collected under the Self Assessment system. This does require, of course, the completion of a Self Assessment tax return every year.

Edited by Eric Mc on Tuesday 16th June 08:29

Thank you Eric, most useful.

I've been operating as a one man Ltd Co for 6 months now. However, I have an accountant to sort out the sums, because I am quite simply clueless when it comes to these things.


ETA: Because today I am also seemingly useless at spling.

Edited by asbo on Tuesday 16th June 16:53

Except you are not "Self Employed" - so most of what I said isn't very relevant to your situation

[esselte]

Excuse my ignorance but this seems as good a thread to exhibit it as any other....is there any difference between "self employed" and "freelance"..?

[JonRB]

esselte said:

Excuse my ignorance but this seems as good a thread to exhibit it as any other....is there any difference between "self employed" and "freelance"..?

Depends entirely on the structure of your payment vehicle and contract with the client.

If you are paid directly by the client on their payroll then you are a temporary or casual employee of theirs, if you are a Sole Trader and paid in your own name then you are Self Employed, and if you operate through your own Limited Company then you are an employee of your company.

But in all 3 cases you can still say you are freelance.

Edited by JonRB on Tuesday 23 June 11:52

[esselte]

JonRB said:

esselte said:

Excuse my ignorance but this seems as good a thread to exhibit it as any other....is there any difference between "self employed" and "freelance"..?

Depends entirely on the structure of your payment vehicle and contract with the client.

If you are paid directly by the client on their payroll then you are a temporary or casual employee, if you are a Sole Trader and paid in your own name then you are Self Employed, and if you operate through your own Limited Company then you are an employee of that company.

But in all 3 cases you can still say you are freelance.

So theoretically I could be on a company's payroll and still be freelance? I thought being freelance/self employed meant you were responsible for your own tax/NI etc....shows how little I know...

Edited by esselte on Tuesday 23 June 11:56