Five Questions About: Becoming self-employed

 

I want to work for myself in 2012 but what do I need to do to become self-employed?

Let HM Revenue & Customs know. You can contact it online or by phone, but you must register as self-employed within three months, or risk a fine.

You do not necessarily need to pay an accountant to manage your affairs, especially if you are not expecting to earn a lot initially. Low-cost accounting software could prove a worthwhile investment.

What must I do in terms of tax and National Insurance?

Once you are registered as self-employed, you will need to start paying Class 2 NI contributions, which are £2.50 a week. The exceptions are if you expect to earn less than £5,315 a year or if you are already making the payments. Even though you will not pay any income tax in the first year, you must save up for your first tax bill.

Do I need to be VAT registered?

If you expect to have a turnover of at least £73,000, you must register for VAT. Otherwise it is your choice. If your clients are going to be consumers, you should avoid registering as it will push your prices up by 20 per cent.

What should I know about working from home?

If you are likely to have a lot of visits from clients, or will be using your home primarily as an office, for example, then you may need planning permission. It is also a good idea to contact your home insurer to find out if you need to alter your policy.

Any other tips?

If you are setting up as a limited company then you will have to have a business bank account. If you are a sole trader you aren't legally required to have a business account.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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