Planning begins at home

Self-employment brings freedom from the office but needs organisation, says Tom Tickell

At least five million people work at home. More than half of them earn over pounds 35,000 a year - and one in five make pounds 80,000 or more, according to CGU, one of the main insurers. Drive and enthusiasm are vital. But before you get to that stage, you need to be well organised.

Tax

You must notify the Revenue as soon as you go self-employed. This will trigger payment of flat-rate Class 2 National Insurance contributions. Paying these will qualify you for incapacity benefit, the state pension and, for women, the widow's pension and maternity allowance. You will also have to pay Class 4 contributions on everything you earn from pounds 7,530 to pounds 26,000. Those with a turnover of pounds 51,000 or more have to register for VAT.

If you are self-employed, you can claim all expenses incurred "wholly and exclusively" as part of your business. So you can spend money linking up to the internet, installing extra lines, producing promotional leaflets, travelling to conferences or visiting potential clients.

Many people working at home use one room in their house as an office. If, for example, one of six rooms in your home is an office you can set one-sixth of the heating and lighting bills against tax, as well as one- sixth of the rates. There will be many other tax-deductible expenses, and an accountant can make the most of the allowances open to you.

Home insurance

Some specialist insurers, like Zurich, offers home office cover as an add-on to their standard contents insurance. Other insurance groups offer much more specialised policies (see box for details of all-in policies).

"Most self-employed people need much more than extended contents insurance cover," says Ian Jones, of broker Tolson Messenger, which specialises in deals for the self-employed. "Insurance contracts will always cover mobile phones or laptop computers if they are stolen from home. But they may well leave you on your own if equipment disappears when you are visiting clients."

You should tell your mortgage lender that you are going to work from home and your motor insurer if you plan to use the car for your work.

If you are thinking of moving house or taking out a loan, say, for a new car, do it before you go self-employed. Lenders are notoriously old fashioned and many still demand three years' audited accounts before they will take you on as a risk.

Look at taking out a flexible mortgage before you go self-employed. These deals allow you to make overpayments when you have cash to spare, and then miss a month or two when times are harder. Many lenders have flexible deals, including Legal & General, Woolwich and Sainsbury's Bank.

Health

It's vital to sort out insurance that will pay a lump sum if you fall ill, or pays you an income if you can't work through illness or disability. Premiums can easily top pounds 100 a month for a woman wanting a monthly income of pounds 1,300. But you can knock down the cost by agreeing to a lengthy waiting period before the policy pays out.

Also check all your existing insurance policies. Some unemployment and sickness insurance polices designed to pay the mortgage when you have no income are set up to exclude the self-employed. If you have an income replacement scheme in place, you can probably do without a separate mortgage payment policy.

n Contacts: Axa, 01222 239 239; Cornhill, 0845 601 0594; Norwich Union, 0800 0562 450; Tolson Messenger, 0800 374 246.

HOMEWORKER COVER*

*For a 35-year-old graphic designer living in Cambridge

Cost Equipment Equipment Employer/

(home) (away) public

liability

Tolson pounds 228.48 pounds 7,500 pounds 1,500 Yes

Norwich Union pounds 315.22 pounds 7,500 pounds 2,250 Yes

Cornhill pounds 449.63 pounds 7,500 pounds 1,500 Extra

Axa Unity pounds 466.27 pounds 5,000 pounds 1,500 Extra

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm today
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
News
Billie Whitelaw was best known for her close collaboration with playwright Samuel Beckett, here performing in a Beckett Trilogy at The Riverside Studios, Hammersmith
people'Omen' star was best known for stage work with Samuel Beckett
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'