Thursday, November 22, 2012

6 Do’s and Don’ts of Being Self-Employed

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There are many advantages to being self-employed from tax efficiency and flexibility to career enhancement. As with any job in any sector, there are rules to abide by. When one works in a permanent role, you have a strict work schedule you need to adhere to and you have an employer that you are answerable to. 

Contracting is more flexible but there are still do’s and don’ts that you need to stand by. You are your own boss however there are certain things which you need to know.

Here is a guide to help you comply with all UK law.

Claim for expenses 

There are special rates and allowances which you can claim back as a freelancer. During your work you will incur certain expenses like mileage and accommodation. Although you will have to pay these with your own money, you can submit a claim to your client and get the money back. Find out what rates you can be compensated for because they are tax deductible.

Pay taxes on time 

As a self-employed person, you are in charge of your own tax affairs which means you need to file your own tax return and pay any owed taxes by the deadline set by HM Revenue & Customs. Any late payments will get a fine so make sure you file your return on time whether it is by post or online.

Have the right business structure 

There are various business structures available to choose from such as limited company, umbrella company, sole trader and partnership. You need to choose the right one for you and make sure you operate within the law.

Business structures to choose from include:

  1. limited company 
  2. umbrella company 
  3. offshore benefit employer trust (EBT) 
  4. sole trader 
  5. partnership 
  6. limited liability partnership 

Keep business, business 

When you become self-employed, you need to keep everything about your business separate to your personal life. This can be difficult but by having a dedicated bank account just for your business finances, you ensure no lines get crossed. If you have a profile on social networking sites like Facebook or Twitter, set up separate business accounts.

Get expert help 

One of the main things you must do is get expert help. If numbers has never been your specialty and maths isn't your strong point, it will benefit you to seek professional accounting help. It may seem like a waste of time and money but in the long-run it will save you much more money. The specialist accountants can help you to avoid costly mistakes whilst advising you on legalities like IR35 and the Agency Workers Regulation.

Do your research

Being self-employed isn't a walk in the park. There will be times when work is quiet and therefore you will have dry financial periods. Make sure you do your research to ensure your desired industry is competitive and thriving.

Have a back-up plan in place and remember, if it doesn't go to plan don’t beat yourself up about it. Being self-employed just doesn't work out for some people.

Follow these do’s and don’ts to become a successful freelancer!

This article was provided by Nixon Williams, a leading freelancer accountancy firm in the UK.

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