Approximately 4.7 million workers in the UK are self-employed, opting to be their own boss.
Self-employment can provide you may financial rewards, and the flexibility to run your own business like the way you want.
Whether you become self-employed is the next essential step down the career path that you wish to follow or you aim for such lifestyle, then you wish to know the pros and cons of going it alone. It’s a dream which is likely to become a reality if you want to set it right.
What is self-employment?
Firstly, to be self-employed means you work for yourself as a freelance or the business owner rather than for an employer.
Pros of going self-employed
Flexibility to run your business on your terms
The flexibility means freedom coming with entrepreneurship is one of the largest and most attractive benefits of going self-employed.
For most individuals, the real instance of going to work is taking orders from your boss by sitting in an office. The primary purpose of people becoming sole traders or freelancers is to become their own boss.
On the other hand, being self-employed means you select which contracts you wish to take on, taking control of all your own business. You no longer have someone watching you and telling you what to do. Each decision you make is yours.
Specific financial rewards
Being self-employed particularly lower your tax bill. The specific allowances, benefits and reliefs you can easily claim if they are meant for your business. These may consist of the office costs(e.g. phone bills or stationery bills), marketing and advertising( e.g. website costs) and travel costs(bus and fuel tickets). There are certain tax reliefs available which can assist you in increasing your profit and lowering down your tax bill.
On average, 45% more is earned by freelancers than those who are traditionally employed. So, in many grounds of work you will also have the avenue of earning more than if you were paid hourly and self-employed.
You’ll also offer more value to the client because they only pay for the time you work and don’t require to pay you any in-work benefits, such as sick pay or annual leave.
Flexibility of hours
Working from home is a likelihood for some form of work, means you can adjust your schedule properly around your life.
You must be having children and need more time for their up-bringing, but don’t wish to sacrifice your working.
You may be more energetic working from the afternoon and late into the evening, instead from early in the morning. The goodness of being self-employed means there is a likelihood to select when you begin and finish work. Although, it’s significant to remember you only get out what you put in.
So being self-employed you get to form your own schedule. How perfect does it sound?
Cons of going self-employed
Self-payment of taxes
If you’re self-employed, you will have to carry out with all of your own income tax and national insurance contribution (NIC). This consists of doing all paperwork on your own and filing your tax returns to HMRC.
If you are a director of a company or self-employed or obtain any other non-taxed income, then you’ll require to file a self-assessment tax return. For self-employed, you’re expected to issue records which includes the details of all your sales and takings, and purchases and business expenses records.
On the 31st January following your tax year end you are required to pay your tax and NICs. However, you will be asked for payments by the HMRC on account for the consecutive year’s estimated tax—on 31st January and 31st July each year.
Settling your own taxes can be extremely time-consuming, so you may wish to save your time by outsourcing your accountancy work.
Less job security
You don’t have a secured set of working hours or days, if you are working under the orders of someone else unlike a regular nine-to-five employee. Hence, it’s your responsibility to ensure that you have sufficient work to justify your reliable source of income coming in every month.
You’ll require to be active in looking out for potential business avenues. It may be tiring for you at times if you can’t search any work, so be ready for when business is silent.
Unfortunately, while there may be the likelihood to lower your tax bill, you won’t be eligible to basic employment rights. It’s relevant to be familiar of. The rights you will miss out on are:
- annual leave
- sick pay
- minimum pay
- maternity leave
- the right to join a union
- working time rights
- protection from discrimination
- health and security protection
You’ll not be insured by workplace pension schemes such as pension contributions from an employer. So as going solo you will need to make your own pension arrangements.
Hence, it is rewarding to run a successful business going solo or self-employed. The positives of the lifestyle is beneficial. Of course, there are negatives but you need to be certain of your decision. Also, you can take help from one of the best accountants in London.