Congratulations on becoming self employed! This is an exciting time however there are a few key points to remember to make the process go as smoothly as possible:-
Tax & National Insurance
If you were previously an employee you didn’t have to worry about this as the payroll department deducted them automatically and you received the balance.
As a self employed person you will now have to pay two types of national insurance, as well as paying two years worth of tax in the first year of trading.
You will now pay class 2 contributions, which are set at a fixed amount per week.
In addition, you have to pay class 4 contributions payable, based on the profit at the year end. Currently 9 percent.
As a self employed person you pay your tax by the 31st January following the end of the tax year. This for all practical purposes the 31 of March.
However, to make up for this benefit the revenue also ask for payments on account for the following years estimated tax – on 31st January and 31st July each year.
Therefore after your first year, your tax bill may actually be 150% of the amount you were expecting, with a further 50% due in July.
These forward payments are then netted off against the following years tax.
It is important to provide for these liabilities to ensure that interest charges and late payment penalties do not arise, which can significantly increase your liability.
It is also important to ensure that deadlines for registration and submitting returns are followed in order to avoid needless penalty charges arising.
You are the whole operation
A good question to ask a room full of self employed people is ‘who here works in sales?’ – the actual answer is that everyone does!
As a self employed person you are now also your sales department, admin assistant and chief bottle-washer.
It is important to realise that you may have to spend a significant amount of your time on tasks that you had not planned on and for which you don’t have the skills or knowledge.
Get ahead with expert help, this can be cheaper in the long run and you can avoid mistakes by learning from other’s experience and training.
Many self employed people think that one way to save money is to do everything themselves, such as their web site, sales/marketing, tax returns, etc.
However, if you work out the number of hours this actually takes at the rate you could earn from a client or customer, combined with the results then you could actually find that in many cases that you could save significant money, time and hassle by getting some help at an early stage.
If you want to know more about the above issues so that you can get the answers you need before you start your business please contact Edward at email@example.com or call him on 01483-453755