To transition into this profession, you must also inform HMRC of this change as soon as possible.
As a self-employed individual, it may come with many financial difficulties and personal challenges that accompany this particular profession. In addition to this, you are responsible for your own duties and this may prove to be overwhelming, especially for those who are just starting out in this profession.
There are many advantages to being self-employed and many have chosen this particular profession for more autonomy over their profits. Additionally, many found this line of work to be a necessity during the pandemic as most were made redundant as well.
Contrastingly, there are specific financial considerations of this profession that you must be aware of. For instance:
- Applying for insurance such as Income Protection Policy is extremely critical as a self-employed person. Statutory Sick Pay (SSP) and other health insurances are usually covered by your employer, however, this now wholly depends on you as a self-employed person;
- As a Sole Trader, you must save sufficiently towards your retirement. Being a single trader means that your business will not benefit from employer contributions;
- If you are a director of a Limited Company, you can determine how much National Insurance you pay as this is based on how much you pay towards yourself;
- If your company has a taxable turnover that reaches the current threshold of £85,000 then you are required by law to register for VAT. Read our blog post here on, “A Simple Guide on VAT Registration.” for more information on how to complete this process;
- Prepare an emergency fund for unpredictable circumstances relating to your business. Emergency funds can enable your business to survive events such as the COVID-19 pandemic;
- You must distinguish your personal funds from your business’ finances. Failing to do so can have a negative impact on our business as a whole. It is recommended that self-employed people refer to specialists and other professional financial advisors who can provide more information on how to run a more tax-efficient business.
There are many benefits that self-employed people are eligible for. According to Turn2us, the same rules apply to those who work for an employer and for self-employed people.
We have selected some of the main benefits that can help you as a self-employed person in 2021:
- Self-Employment Income Support Scheme - this is designed to help self-employed people who experienced a loss of income and/ or had to work as a carer for another individual. The government will provide you with up to 80% of your profits for 3 months. This scheme is especially for those directly affected by the COVID-19 pandemic;
- Tax-Free Childcare Scheme - this is an initiative introduced by the government to top up the amount that is paid by parents into Tax-Free Childcare accounts;
- Working Tax Credit - The Tax Credits Office will normally calculate how much Working Tax Credit you are entitled to based on your self-assessment tax return;
- Universal Credit - Every month, you must declare your wages to Universal Credit. To determine your earnings, you must declare how much you earned throughout that assessment period in order to successfully claim Universal Credit.
If you have found yourself in a situation where you need assistance with mortgage payments, you can only get help if you are entitled to certain benefits such as Income Support, Income-based Job Seeker’s Allowance (including Employment and Support Allowance) and Pension Credit.
As a self-employed individual, you have a multitude of tasks to take care of in order to keep your business running smoothly. Persona Finance can provide you with remote accounting services that can manage your business and accounting needs right away. Contact Persona Finance now at [enquiries@personafinance.co.uk] for more information on how self-employment works and other business/ accounting needs.
