The leap into self-employment is a thrilling one, and it can be hugely rewarding. However, it pays to take the right steps to help you get off the ground with gusto and give yourself the best chance of landing on your feet.
It all comes down to being financially prepared, and we’ve put together some tips to help…
Build a financial buffer
Always make sure you have a healthy amount of money on the backburner before quitting your position in full-time employment. Save like you would for a holiday, putting hard-earned cash aside from your payslip every month so you have enough to fall back on.
It’s likely that a lot of money will leave your bank account when you first enter self-employment due to start-up costs and investment, so having a financial buffer is essential. Take your time to build it, and make sure you have enough.
Understand your liabilities
Employers are responsible for handling all their staff’s tax liabilities and national insurance contributions, deducting them automatically through PAYE. So, if you do move from being an employee to self-employed, it’s important to understand what’s required to ensure that you pay your taxes on time.
When you go self-employed, it’s up to you to calculate your tax, notify HMRC of how much you owe, and fill in all the necessary Self Assessment documents If you have employees, however, you will need to deduct PAYE tax and national insurance from their gross wages.
You’ll need to familiarise yourself with the Self Assessment tax return deadline and work out how to fill a Self Assessment tax return. You’ll also need to know when to make payments and how to go about it.
Take advantage of expenses
There are a number of business-related purchases for which you can claim money back, but it’s important to understand these expenses before you start working for yourself. This will help to create a more accurate financial plan moving forwards, putting you in a better position to maintain a healthy cash flow.
You’ll also need to list these expenses accurately on your Self Assessment tax return, citing the type and amount so the taxman can reimburse you accordingly.
SimpleTax: The self-employed worker’s best friend
Swapping the security of the 9-5 to go into business alone can be an unnerving prospect, and there’s plenty to take into account… but SimpleTax tax software is primed to support you every step of the way.
Designed to help you submit accurate, timely, HMRC-friendly tax reports, our cloud-based tax software helps you to gain an accurate reading of your financial state so that you better prepare. It will also alert you to liabilities and indicate the expenses you might be able to claim.
Playing catch-up with your tax commitments and finances is no fun for anyone. But when you go self-employed, you’ll realise you simply don’t have the time or resources to journey back through months’ worth of figures and receipts. Prepare for your solo venture well in advance by registering for a free trial of SimpleTax tax software today, and take advantage of our online system that allows you to update as you go.
If you have any questions, don’t hesitate to get in touch with our team. We’ll be happy to help you take that first step towards great financial preparation for business ownership.