Becoming self-employed is a big decision, as to choose such a way of living will mean giving up a regular income from an employer and then being responsible for your own earnings. If you have a family who rely on you financially, you will want to believe that you can make enough to support them to at least the standard that you did before. In favour of being self-employed, your earning potential is now only limited to your ability to grow the business. Of course, it doesn’t all have to be done yourself. There are teams of people that can help, such as sales professionals who can shed some insight into effective sales techniques to make sure you make enough revenue to run a successful business. They might suggest using a subscription revenue model to try and get customers to re-purchase every month, allowing the business to easily predict their revenue. Perhaps that’s worth doing. Sales professionals could always help you to grow the business. Additionally, this article will look at some of the things that you ought to know to become self-employed in the UK.
Type of Entity
Many business people will start off as sole traders, or partnerships if sharing the knowledge and expertise of running the business with one or two other persons. A decision that is important is whether, in the case of a small business, to make it a limited company. The advantage of this is in being able to protect personal assets, such as a house that is being lived in by a business owner and their family. The disadvantage is in the time and expense to set up and register a new company with Companies House and in the documents required to continue to run it. Specific documentation is required, including a certificate of incorporation, a memorandum of association, articles of association, and share certificates. In addition, statutory registers need to be kept up to date, including a register of members, a directors’ register, a register of directors’ home addresses, secretaries’ registers, and charges’ registers. If the business has not become an incorporation yet but they are planning to, they may want to click here now to see how this can be done before registering with Companies House.
Generally, limited companies fair better than non-incorporated businesses in terms of the tax that they pay, because rather than paying income tax, they pay Corporation Tax on their profits, which at the time of writing was 19 percent. In addition, they can claim a wide range of tax-deductible costs and allowances that are set against profits.
Staffing
The decision about staff may come later in the life of a business if you are to first establish the business on your own and then grow it to a size that means staff is required to help run it. Conversely, you may straight away require additional knowledge and support to help you run the business from its infancy. If you are employing staff in the UK, a relatively new law requires that employers automatically enroll workers in a workplace pension scheme when they are at least 22 years of age, but below pension age, and earn at least 10,000 per year.
To pay staff, you will also need to find out about HM Custom and Excise’s PAYE (Pay As You Earn) scheme, which was set up to collect the required tax and national insurance from employees on behalf of the government. Alternatively, if you can afford it, you could enlist the services of a bookkeeper.
VAT
Being VAT (Value Added Tax) registered has its advantages and disadvantages. It costs money administering the scheme on behalf of the government, but on the other hand, it allows you to claim back the VAT on your purchases. You will, however, have no choice over whether to VAT register if your turnover, in the UK, exceeds the 85,000 threshold permitted. This applies to 12-month periods ending 2020/21.
Let’s consider an individual who is self-employed in the Travel Sector as a travel consultant. If this individual’s turnover from their travel consultancy services, combined with any other taxable supplies, exceeds the VAT threshold, they are required to register for VAT. Once registered, they must charge VAT on their services (output tax) and can reclaim VAT on their business-related expenses (input tax).
While VAT registration allows the individual to reclaim VAT on purchases, it also entails additional administrative responsibilities, such as submitting VAT returns and maintaining accurate records. It’s crucial for self-employed individuals in the travel sector to monitor their turnover and comply with VAT regulations, ensuring they fulfill their obligations and take advantage of potential VAT reclaims.
The Financial Help Available for Businesses
Banks and similar financial institutions will offer financial assistance to small and larger businesses. To be given a start-up loan, a good business plan is required. This is like a household budget and should include all the anticipated income and expenses that the business is likely to receive and incur during a trading year. It should factor in the fixed costs required for start-up and the projected variable costs incurred in running the business. It is also usually necessary to show projected profits for the next 5 years. Long-term, banks can also offer business loans and overdraft facilities to help with cash flow problems and seasonal variations.
Market Research
To establish demand for your product or service it is vital that, before starting your business venture, you have to conduct your own thorough market research. If not your own, you can look for the research from a reliable secondary source. Additionally, you can also look for tools like Kano Model that can help in analyzing the market, creating a business and product launching plan as well as providing special features to customers based on the data collected.
In conclusion, there is much to think of in a start-up and running a business of your own. From managing basic business operations to marketing, advertising, and handling business accounts, there are many things to consider and work upon. Hopefully, this article has given you some idea as to what is involved.
