Posted on: 15th October 2020
With the ongoing changes and disruptions to people’s lives, many have turned to the domain of the self-employed in order to adjust to the new normal, if it can ever be really classed as such, and managing your cash flow is part of that equation.
Becoming self-employed for the first time opens up many responsibilities and you witness a lot of changes; from satisfaction levels to the all-important financial situation. It may be easier than you first envisioned and is more popular today than ever before, with a reported 5 million people in the UK alone being their own boss and plenty of financial services to aid them.
For those taking the plunge, here is a quick step guide to get you started.
To work for yourself means registering as self-employed.
This is mainly as a tax requirement so as to report your income through a self-assessment as well as accessing other requirements like a self-employed bank account and. By simply registering on the gov.uk website or over the phone, its a painless exercise that does not take up a large amount of time.
Separate Bank Account
Ideally, you will need a business bank account to separate your business finances and your personal.
This makes it easier to file a tax return and provide evidence of business transactions to HMRC if required. Business Bank accounts do charge a fee and some can offer a fee-free period of up to two years, however, any transaction considered non-standard will incur an extra charge regardless. Pretty much any big bank offers business accounts and you can also utilise an app-based banking alternative should you prefer.
Setting up a limited company requires rules around accounting records that need to be kept.
From company spending to assets, debts and stock, everything needs a transactional record to be kept. Hiring an accountant will help with these areas but if you are a sole trader you will just need to keep records of business income and expenditure to complete your tax return for HMRC. In both cases, records of receipts, statements and invoices will need to be kept.
Spreadsheets are a good way to keep on top of income and outgoings and there are apps available that help to organize all into a body of work to keep on top of.
Financial planning for youryears is achieved through paying into a personal as well as combining them with previous into an easily manageable plan.
Without receiving employer contributions whilst self-employed you can still benefit from a tax relief with the government adding £20 for every £80 put into your pension on a basic rate tax payer, allowing you to claim back further tax relief through a tax return if you pay tax at a higher rate.
With many people planning on working right through to the new retirement age or feeling they have no option but to, it is always best to talk with independent financial advisors manchester to get the best course of action in retirement planning Cheshire.
When planning the sudden delve into self-employment there is always help in getting the best quality of life at the end, so talk with the team atto help aid your successful transportation into being your own boss.