Should I become self-employed?
There are plenty of reasons to become self-employed. As experts, we are happy to take you through a short guide of HMRC’s Tax regulations and legal requirements of becoming self-employed. We will ensure you understand the advantages and disadvantages of being self-employed so you can choose the best option to suits your needs.
The advantages of being self-employed are as follows:
Quick and easy: easy registration
Flexibility and control: You will have more control and flexibility over your job
Expenses: when calculating your tax liability certain costs could be deducted
Location: you can work from home
Salary: your earnings are higher when you’re self-employed
Simplest business type
Duties: accounting duties are much less and straightforward
Easy access to money: as self-employer you can simply withdraw money whenever you want
The disadvantages of being self-employed
Personal liability: all the business debts are your debts and you have the full responsibility of repaying them
Funds: you must find funding by either taking out a loan or by using personal savings or borrowing from a friend
Pay more tax: this can only become and issue when your business starts generating more profit.
Won’t get paid when you’re on holiday or sick
Why a limited company?
If you’re thinking of setting up a limited company you should be aware of three main tasks such as registering with Companies House, drawing up a memorandum of association and paying corporation tax. Below is a short guide of some advantages and disadvantages of setting a limited company:
The advantages of having a limited company are:
Limited liability: you are separate from the business i.e. if the company gets into serious debt you are not responsible for that debt
Lower taxes: a limited company will enable you to save more tax
Greater credibility: you can get more clients who prefer to work with limited companies because of their limited liability
Selling shares: the company can sell the shares to raise funding
Now we will go though some of the disadvantages of setting a limited company:
More responsibility: you will have to take care of the followings:
- Annual return
- Directors’ payroll
- Full statutory limited company accounts for HMRC
- Abbreviated statutory accounts for Companies House
- Corporation tax return
Company bank account: you will have to set up a company business account
Directors, shareholders and employees: you have to assign roles
Complicated withdrawals: unlike self-employment any withdrawal from the company should be either in form of salaries, dividends or loans.
So which one you should go for?
Choosing whether to become self-employed or limited company, all depends on your specific situation. If you’re turnover is low, self-employment could be a better option. But when the figures increase then it is ideal to set your business as a limited company as it will save tax and give you more security and attract more clients towards your business.
If you need any help, feel free to contact one of our experts via the contact page who will be more than happy to assist.