Going Self-Employed for the First Time: Step-by-Step

Going self-employed for the first time can be nerve-wracking. There are many benefits to being your own boss. But when you’re your own boss, you have to take care of everything. So if you’re new to the world of self-employed work, how can you be sure that you’re doing everything right?

This is your essential step-by-step guide to going self-employed for the first time. We’ll explain the process for registering as self-employed and explore some of the things you’ll have to think about. We’ll also link to some of our other resources to help you make your first steps into self-employment with confidence.

If you’ve just taken steps to become self-employed how can you be sure you’re doing it right?

Are You Ready to Go Self-Employed for the First Time?

Self-employment isn’t for everyone. It’s a huge commitment that takes a lot of work.

Is it worth it? Absolutely! Few things are more rewarding and potentially profitable than working for yourself.

But before you begin, consider the following:

  • What sort of work are you going to do? Will you be doing your existing job, but independently? Or will you be learning a new skill or trade? If so, are there any qualifications you need to get? And do you have all the equipment you need to do what you want to do?
  • Who will your clients be? Research your industry. If it’s a crowded market, how will you stand out? Perhaps you already have a few clients to get you started. But have you thought about how you’ll grow? Who will your new clients be? Where will you find them, and how will you encourage them to work with you?
  • Can you multitask? When we say that self-employed people need to do everything, we mean everything. Marketing, accounts, networking, admin – it all adds up! Specialist software can make some tasks easier, and eventually you might be able to hire people to take care of certain things, such as bookkeeping and accounting. But initially, the sheer amount of work involved in going self-employed might seem overwhelming.
  • Can you afford it? Going self-employed for the first time means saying goodbye to that steady paycheque. If you’re lucky, you’ll quickly find clients and you’ll start to make money immediately. But more likely, you’ll have good months, bad months, and perhaps some very bad months too. So what’s your financial situation like? Will you be able to handle the uncertainty? A cashflow forecast will help you here. Head here to read our guide to setting up a cashflow forecast even when you’re completely new to the game.

The Legal Bit of Going Self-Employed

So you’ve got a skill to offer and you feel ready to start working for yourself. The first thing you need to do is tell HMRC who you are and what you’re doing. That way, they’ll know how much to tax you each year.

You can register as self-employed online in a matter of minutes:

  1. Head to the government’s online registration portal.
  2. Enter your email address. Follow any instructions.
  3. In a matter of days, HMRC will send you a 10-digit Unique Taxpayer Reference (UTR) by post. You’ll also your very own online HMRC account, with instructions on how to use it.

Once you’ve registered as self-employed, you’ll have to keep detailed records of your finances – both your profits and your expenses. You’ll then have until January 31 each year to submit a self-assessment tax return. You can do this via post, but it’s considerably easier to do it online. In fact, you might be surprised at just how easy it is to do your own taxes!

Choosing Your Self-Employed Trading Name

When going self-employed for the first time, at some point you’ll have to choose a name to trade under.

The government sets strict guidelines for business names:

  • Your business name cannot be “offensive” or “sensitive”. Though the rules don’t specify exactly what counts as “offensive” or “sensitive”, you can no doubt imagine the sort of things they have in mind.
  • You cannot use misleading terminology. For example, you can’t use the word “limited” or “ltd” in your name unless you’re a limited company.
  • You cannot breach any existing trademarks. If you’re a freelance accountant, for example, you can’t call your freelance accountancy business “Microsoft Accounts.”
  • You need permission to use certain words, such as words that suggest you’re connected with the government or local authorities. Head here for more information on choosing your name of incorporation.

Limited Company, Partnership, Sole-Trader and VAT – Long-Term Requirements

When you make more than £1,000 from your self-employed work in the space of a tax year, then you’ll have to register as a sole trader. Head here to read our full guide to registering as self-employed, what this means, how to do it, and when to do it.

If you’re a sole trader, you’re personally responsible for all of your business’s debts. This can be risky. Which is why some self-employed people decide to register as limited companies.

Register as a limited company, and your business finances will always be separate from your personal finances. As a limited company, you’ll take on a lot of additional financial and administrational responsibilities. But the added financial security can more than justify the hassle.

Head here to read a detailed guide to registering as a limited company. This guide also has more information on just what your responsibilities will be running a limited company.

Eventually, you may also have to register for VAT. This happens once your annual taxable turnover exceeds £85,000. So if you do have to register for VAT, it means that you’re doing something right! Though there are a few reasons why you might decide to register for VAT even before you hit the income threshold. Head here to read our full guide to VAT for the self-employed.

Other Guides to Going Self-Employed for the First Time

As you might have gathered by now, though the process of registering as self-employed is quite straightforward, there’s still a lot you need to think about!

Below you’ll find some of our guides to some other things you may need to consider when going self-employed for the first time:

  • Business premises. Will you get your own business premises, or will you work from home? You can read our guide to setting up a business from your home. You may also have to think about business rates – taxes the government applies to buildings that are used for business purposes. Head here for more information on business rates.
  • A business bank account. You might consider getting a business bank account. Indeed, there are some circumstances in which you might need a business bank account. It can cost money to open a dedicated business account, but doing so can open up a range of benefits. Head here for more information on business bank accounts.
  • Your pension plan. When you go self-employed, it will mean giving up on your employer’s pension scheme. But you can still plan for the future with your own self-employed pension plan.
  • National insurance. Self-employed people still need to make National Insurance contributions. But how much do you have to pay, and how and when should you pay it? Read our full guide to National Insurance contributions.
  • HMRC. As we said above, once you go self-employed, you’ll have to keep your own financial records and submit your own tax return by January 31 each year. One thing to bear in mind is that HMRC sometimes investigates self-employed businesses. They do this when they suspect that there might be something amiss in your accounts – which is why it’s important to keep accurate records. Head here for more information on HMRC investigations.

Going Self-Employed for the First Time – One Last Thing!

Going self-employed can be immensely rewarding, but there’s no denying that it’s a challenge. It’s risky too. It means giving up on the security, the certainty, and the safeguards you might have taken for granted as an employee.

But don’t worry. There’s an easy way to manage the risks of the self-employed lifestyle. Planning is important, but you can also get an essential safety net with some comprehensive business insurance.

Head here to read a full guide to the various different types of business insurance that can cover you against almost anything.

At Tapoly, we specialise in giving self-employed people the cover they need for less. You can get bespoke self-employed insurance for as little as 35p a day, with no hidden fees.

Head here to get a quote.

If you have any questions or would like to discuss your options please contact our Tapoly team at info@tapoly.com, call our help line on +44(0)2078460108 or try our chat on our website.