Your essential guide to becoming self-employed
Tools & Resources
Key learnings
- Self-employment can be a rewarding route to go down for those with specialist skills or training.
- Freelancers and small business owners generally take on more risk and responsibility than PAYE employees.
- There are specific HMRC requirements for the self-employed.
- There is support for starting a business if you're currently unemployed.
Becoming self-employed is something many of us think about at some point in our careers. The opportunity to work for yourself can be incredibly rewarding, both personally and financially, if done correctly. On the flip side, being self-employed carries increased responsibilities and it could be seen as being more risky than other types of employment. Here, we discuss the pros and cons of being your own boss and what support is out there to help you be successful.
Statista tell us that as of August 2022, there were around 4.29 million self-employed workers in the United Kingdom. During this provided time-period, self-employment in the UK has grown steadily, from a low of just 3.2 million in December 2000, to a peak of over five million at the start of 2020. In the wake of the Coronavirus (COVID-19) pandemic, however, self-employment has fallen to levels not seen since the middle of 2015.
Self-employment can be for something you want to do in your free time to make some extra cash or can be a whole new full-time career path.
The pros and cons
There are many reasons people choose to be self-employed, such as:
- Setting your own schedule
- Achieving a better work/life balance
- Adopting flexible working patterns
- Increased financial rewards
- Choosing your own clients
- Being in control of your own destiny
Some of the potential drawbacks of self-employment include:
- Lack of structure
- Potential of loss
- More paperwork
- Increased responsibility
- Unpredictable income
What you need to know
There is no doubting that self-employment can lead to success. If you decide to take the plunge and start working for yourself, there are certain things that you must do.
Firstly, newly self-employed people must register as either a sole trader or a limited company with HMRC. If you’re wondering which entity is better for your business, you can speak to one of our advisors or read this hand article on choosing the right business structure.
Once you’ve registered, you will need to think about how you record money coming in and out of the business in preparation for completing a self-assessment tax return at the end of the financial year.
You will also have to ensure you have enough capital behind you in case you suddenly need to take time off as there is no annual leave or sick pay entitlement for the self-employed.
Download our free personal survival template to help you work out your incomings and outgoings.
Next steps:
- If you think self-employment could be for you, speak to an UMi adviser.
- You should put together a detailed business plan to scope the market for your product/service before committing to self-employment.
- More information about support for the unemployed can be found here.
- You can register as self-employed at GOV.UK.
- The Prince’s Trust has some great tools to help you become self employed.