Important things to handle when you go self employed

by Groshan Fabiola I try to cover as many topics as I can

Not having to work under the supervision of a superior is certainly the dream of any employee. If you are one of the lucky people who have the possibility of going self employed, the first thing you will need to do is research the topic thoroughly, and learn about the aspects involved in the process of going self employed. Because you probably desire to handle everything by the book, and not deal with any unpleasant situations due to lack of information, following these few useful tips will certainly help you out. So if the topic has caught your interest, and you wish to find out more, just keep reading:

Get the right type of insurance policy

Regardless if you want to become a self employed beautician, a massage therapist or any other profession, you will need to understand the importance of getting self employed insurance. Being financial covered can prove to be essential in the most unexpected situations. Because you are no longer financial dependent on an employer, and all sources of income are produced by yourself, taking a leap of absence for example, can materially affect the further development of your business and your financial well-being as well. Whether it is short term illness or long term illness, facing a health problem when you are self employed can lead to far more complications than you would think. Also, depending on the policy type you opt, any financial losses your new business might deal with, such as theft, stock damage and so on, will also be covered, which can be a crucial aspect for the smooth going of your business in the eventually of an unpleasant occurrence of this kind. There are many insurance providers on the market, offering a wide range of customized policy options, two examples being Tradesman Saver and Trade Risk, so you can get the following coverage possibilities, depending on your personal needs and requirements:

Trauma or illness insurance
Permanent and total disability
Tool insurance
Public liability coverage
Income protection

Register with HMRC as self employed

One of the first aspects that need to be dealt with as soon as you decide to go self employed is registering with HMRC, being a step just as important as getting public liability insurance, for example. There are guidelines on the internet on what the overall registration process involves, so you should not have any difficulties in this department. However, you can always resort to the assistance of a professional, if you need registration support. Without taking this step, you would be working illegally, so to prevent yourself from facing legal concerns, take care of your HMRC registration before proceeding with any business practices.

Should you register for VAT?

Being self employed may or may not require you to register for VAT, depending on the annual income you will be having. Anything that surpasses £85,000 a year will demand a VAT registration from your part. However, because you are at the beginning of your newly established business, managing to benefit from such a high income is less likely to happen. If during any stage of your business cycle, you conclude that you might annual VAT threshold, it is recommended to inform HMRC, and thus prevent receiving a fine. Also, having a VAT number can provide you with more credibility, influencing the image of your business, and in some situations, calling your VAT back on certain eligible purchases might be possible, which is certainly a plus.

Get a bank account for business purposes

Once you become a sole trader, one aspect you will need to comprehend is that separating the finances of your personal affair from those of your business is of great importance. This is why opening up a new, separated bank account is recommended. Once you start seeking options, you will be presented with many great offers, some banks providing even up to 24 months free business banking. Having a separated bank account on your invoices and cheques will also look far more professional.

Income tax

Paying income tax on your earnings is of course something you are obligated to do. Although there are several beneficial allowances and tax reliefs you might be able to claim, you still need to always be 100 percent certain that all of your taxes are covered. This way, in the eventuality of a tax investigation, you will not have any worries. Also, you will probably need the services of an accountant, to simplify tax payment, so search for a reputable and experience specialist for the job.

Saving and pension

As a regular employer, worrying about your membership to a pension scheme is not an issue. Well, when you become a sole trader, thinking about savings and your financial future after retirement falls within your responsibility. However, once you start researching the topic more thoroughly, you will find out that there are many private pension options you can resort to. A self invested pension could be the best choice to make in your situation. Although you might be far from retirement, this is something that you will be glad you have taken care of – the sooner the better.

Keep up to date and accurate financial records

Last but not least, keeping on top of your books is another essential thing you will need to do. Having accurate and clear records of all the financial transactions is something that you are legally obligated to do. Overlooking any detail regarding this task can lead to unpleasant repercussions, so do not take any risks.

Although deciding to go self employed can turn out to be an incredibly rewarding decision, there are several responsibilities involved, and things you must do in order to make the most out of your new professional status. From opting for the right insurance policy and thus protect yourself from any potential financial inconveniences, to keeping records of all your financial movements, these are the most relevant things to handle after deciding to go self employed. Regardless of the field of practice you are entering, all of these steps need to be made.