How to Become Self-Employed: Starter Tips

It’s fair to say that work in the UK is changing. For decades, workers all over the country have been restricted to the confines of the 9-to-5, destined to trudge into the same office building every morning for 8 hours a day. Thanks to advances in technology, however, employees are now escaping these strict, monotonous schedules and choosing to work for themselves instead.

The latest figures from the Office for National Statistics (ONS), show that the number of self-employed workers in the UK currently sits at around 4.8 million people. This now makes up just over 15% of the entire labour force, marking an increase of 1.5 million workers in under two decades as the number of freelancers, contractors and sole traders continues to grow.

The initial appeal of self-employment is clear to see, with many workers enticed by the prospect of running their own business, managing their schedule and ultimately enjoying a better work-life balance. But working for yourself also involves increased responsibility and a lack of financial security, so we’ve put together some simple tips to get you off to the best possible start:

Compare Self-Employment Options

Before you do anything, you need to decide how you want to structure your new business. There are three main self-employment options for you to consider: setting up as a limited company, becoming a sole trader or working under an umbrella company. Each option provides certain benefits and drawbacks, so you’ll need to compare each one to figure out which is best for you.

Umbrella companies, for example, remove all of the financial administration you have to go through as a sole trader or limited company, since they calculate your tax and NI contributions before paying you just like a regular employee. Although this is obviously incredibly convenient for those without experience in managing their finances, this avenue also means you won’t make quite as much money.

Your choice of structure will always be important, since this will have a major impact on your profitability, tax responsibilities and personal liability. The right structure for you will be completely dependent on your own circumstances and how you want to operate as a contractor, with many self-employed workers seeking expert advice to make sure they’re setting up in the right way.

Registering as Self-Employed

Once you’ve decided how to set up, you need to let HMRC know that you’re now self-employed. This is a simple process which involves heading over to the government website and creating a Government Gateway account. From there, you’ll then need to provide personal details and further information about your business.

The official deadline to register is 5th October of your second trading year, but HMRC recommends registering as soon as possible to make sure you can avoid any future problems. It’s also worth noting that this isn’t an optional task and you have a legal obligation to register with HMRC; a failure to do so will inevitably result in a hefty penalty.

Once registered, you should also consider setting up a business website as soon as possible. Make sure your domain name represents your business name accurately and your website is hosted by a good service like

Paying Taxes and Claiming Expenses

Depending on how you’ve set up your business, you’ll be responsible for managing your own finances and claiming expenses as a contractor. Since this can seem like such a daunting task for so many self-employed workers (particularly those new to self-employment) will inevitably hire the services of a specialist accountant, while others will attempt to shoulder this responsibility by themselves.

Either way, keeping accurate and up-to-date financial records is a crucial aspect of successful self-employment. Of course, the amount of tax you pay will depend on how much money you’ve made, but the standard tax-free personal allowance in the UK is currently £12,500 – and you’ll pay the typical 20% on annual earnings up to £50,000.

When you’re set up as a limited company or sole trader, you’ll need to submit tax via a Self-Assessment form, while those working under an umbrella company will have this automatically deducted as part of the PAYE system.

Follow Your Passion

The appeal of self-employment often stems from the freedom and flexibility afforded to workers and there is no shortage of new low cost business ideas. Instead of being restricted to rigid office hours and having your workload set by a more senior member of staff, you can now work at times and places which are most convenient for you. Perhaps more importantly, you can also set up a business which lets you follow your passion and concentrate on doing what you do best.

After all, when you care deeply about the work you’re doing and building on your extensive experience, the quality of results will inevitably improve. Once that happens, you stand a much better chance of turning your self-employment journey into a massive success.