How To Go Self-Employed in The UK: by Jade Wimbledon/Jessie Day
How To Go Self-Employed in The UK: by Jade Wimbledon/Jessie Day
How To Go Self-Employed in The UK: by Jade Wimbledon/Jessie Day
self-employed
in the UK
by Jade Wimbledon/Jessie Day
Hello, we are
Simply Business
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providers. Since we started life in 2005,
we’ve helped three million small businesses and
self-employed people find the protection that’s
right for them, from builders to bakers and personal
trainers (we cover landlords, too).
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How to go self-employed
in the UK 2
Wondering how to become self-employed? We’ve got
some tips for getting started – from weighing up the
pros and cons of self-employment, to understanding
tax and benefits when you’re self-employed.
than the salary you’d be able to achieve as an • do you have some money to set yourself
How to go self-employed
in the UK 3
• do you feel confident about managing • your work can be more varied, as you may
your own business, for example managing be working on several different projects for
cashflow, keeping thorough records and different clients at any one time
• have you thought through the impact of entrepreneurial side as you build your own
• if you were self-employed, would you income when you’re calculating your tax
• do you have a space where you’d be able • you may have the potential to earn more
to work, and any equipment you need, or money, as day rates for self-employed
take into account, for example an upcoming • you should be able to ditch your commute,
house move, wedding or new baby? as you’re likely to work from home, or from
employed, and this list isn’t exhaustive: It’s important to take into account the
including childcare
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in the UK 4
• finding clients or a route to market can
initially be challenging
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in the UK 5
registering with Companies House, drawing
Going self-employed for
up a memorandum of association, and paying
the first time
corporation tax. Take a look at our article on
When you’re going self-employed, there sole traders versus limited companies if you’re
are several things you need to do, including not sure about the differences between these
need to do:
Going self-employed
checklist • tell HMRC that you’re self-employed, so
We’ve taken an in-depth look at setting up as with HMRC for more information
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in the UK 6
• if you’ll be working from home, check your • think about your pension – since you won’t
to make sure you’re not contravening any more, it may be a good idea to set up a
terms. You may need to notify your landlord private pension so that you’re still putting
insurance. Take a look at our self-employed The Office of Tax Simplification (OTS) has
insurance page for more details called for an urgent, digitally focused review
How to go self-employed
in the UK 7
of the self-employed tax system, calling it company during the rest of the week. This
‘too difficult (...) to understand’. Until their means you’re both self-employed and
suggestions are actioned, however, it’s worth employed, and you’ll pay tax through both
getting on the front foot with your tax, as soon PAYE and Self Assessment.
as you go self-employed.
You could also be self-employed but only
How much tax you’ll pay as a self-employed work for one company (for example if
person will depend on how much money you have a single major client), but in this
you’ve made and the ‘allowable expenses’ case HMRC will be keen to make sure that
you’ve incurred in the course of your business. the company isn’t just calling you ‘self-
subtracted from your income when you’re contributions and giving you employment
Of course, you may be going self-employed When you apply for a mortgage and you’re
part-time, and continue working for a employed, the lender will usually confirm
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in the UK 8
your income by asking for payslips and bank and certain business-related travel. Check the
statements. When you’re self‑employed, you’ll government website carefully though, as you
usually need to provide business accounts could get in trouble with HMRC if you subtract
including a copy of your self‑assessment tax something that’s not an allowable expense, or
Lenders often ask for between two and For a full breakdown, take a look at our guide
three years of accounts, so you may not be to self-employed tax deductible expenses.
Usually, the lender will take an average of Depending on certain factors, you may
your income over the last two or three years be able to claim certain benefits. If you’re
to calculate how much they’re willing to self‑employed and not earning very much
lend you. They may also ask to see other money, you may be eligible for income
documents - business plans, for example - support or working tax credit, although the
to check that they’re confident you’ll be able latter has been replaced by universal credit for
to keep up with the mortgage repayments. most people. Check the government website
self-employed?
Self-employed tax credits
Self-employed allowable expenses
You can claim Working Tax Credit when
In terms of what you can subtract from you’re self-employed, but in April 2015 the
your income when you’re figuring out the rules were tightened up. Self-employed
self‑employed profit that’s taxable, the list tax credit claimants must show that they’re
includes business insurance, part of your utility trading on a commercial basis with the aim of
bills if you work from home, office costs, stock making profits, and that their self‑employed
How to go self-employed
in the UK 9
work is structured, regular and ongoing. which are known as the Minimum Income
There’s further information on the criteria in Floor. However, a different method may be
this government briefing document. used if you’re in your first 12 months of self-
Self-employed Housing Benefit Income Floor may not apply. During this
not earning very much money, and certain other Self-employed grants
factors apply. When the council is calculating
You may be able to get a grant from the
your eligibility for benefits like Housing Benefit,
government called a New Enterprise Allowance
they’ll probably ask to see your business
if you’re going self-employed. You may be
accounts for the last financial year, or a forecast
eligible if you or your partner has been receiving
if you haven’t started trading yet.
Jobseeker’s Allowance or Employment and
You may be eligible for Universal Credit sick or disabled. If your business is approved,
if you’re self-employed. You will have to you could get a weekly allowance worth up
declare your earnings at the end of each to £1,274 in total, over 26 weeks. You can also
monthly assessment period, and will have to apply for a loan to help fund your startup.
Your Universal Credit payments may be there’s a grant that could be suitable for you.
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in the UK 10
You can also read our guide to small
Business ideas that get you out
business grants.
and about
employed business to
• cleaning business
start?
• courier business
Take a look at our range of guides
from home
• how to start a home business
• clothing brand
• how to start an online shop
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in the UK 11
Further
reading
Coronavirus: what support is
available for small businesses
and the self-employed?
Click here for more >
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in the UK 12