For many people, the idea of working for yourself and turning your skill set into a career can be a dream.
However, the financial uncertainty that self-employment brings can leave you feeling reluctant to take the next step.
By understanding the right business structure for you and seeking legal support, you can create a clear plan on how to turn your passion into a career.
The first step into self-employment is understanding if you want to be a sole trader or bring in partners to achieve your goals.
Operating as a sole trader may suit you best as you run your business as an individual and keep all the profits after tax.
As a trader, you must document accurate financial records and pay tax on profits above your personal allowance of £12,750, as well as National Insurance contributions if your profit exceeds that threshold.
If you find that going into business with others can help develop your business plan, you might consider a partnership where profits and losses are shared among partners, who each pay their own tax and National Insurance.
However, setting up a limited company may work better for you as it separates personal finances from the business and offers more protection and administration.
Self-employment not only offers career independence but also financial benefits, as from 2025 to 2026, self-employed individuals will pay an effective tax rate of 17 per cent, compared with the 27 per cent for employees.
It allows you to control your cash flow, as instead of having tax deducted from each paycheck, you pay your tax bill twice a year on 31 January and 31 July.
When starting a new business you may want to manage and budget your finances better and early filing allows you to do so.
A self-employed individual has the option to file for self-assessment tax return anytime after April 6, following the end of the tax year you are reporting on.
This also means that you can split the cost you pay as much as you like and set up a Budget Payment Plan with HMRC to pay in weekly or monthly instalments if needed.
Early filing allows you to improve financial planning and budgeting, receive quicker tax refunds and avoid late-filing penalties.
By understanding the tax advantages of self-employment, you can even claim tax-deductible expenses, such as equipment, travel costs, supplies and even a proportion of household bills if you work from home.
The Government offers several initiatives to help the self-employed and small businesses, such as start-up funding and mentoring through programmes like The King’s Trust.
Knowing all that is available to you when you become self-employed can be difficult, but seeking legal support can help you understand how to make the most profit.
Self-employment and creating a business start with an idea and with the right support from partners or a legal team, you can set yourself up for long-term success.
By registering as self-employed through HM Revenue and Customs (HMRC) and maintaining accurate financial records, you can take the important first steps into self-employment.
With self-employment comes uncertainty and responsibility, but for those who prepare properly, it is a step towards personal growth and career satisfaction.
If you are ready to turn your skills into a business, our experienced advisors can help you take that first confident step towards financial independence.
For expert financial advice and support, contact our team today.
