Self Employed, how much do I need to set aside?

henrygregory

Hello, I am really thinking hard about going self employed.

I have worked out how much competitors charge for a slightly lesser service;

Around £8000 a year for 1 day of work a week. I can offer a much better service for the same price.
If I could get enough customers interested, I could work for my self all week, or work part time in my current job and do my self employed work on the other days I have free.

My question is, if I am charging a customer 8000 per day, is there any calculations I can make to work out how much I will take away with me after I have paid tax and ni? Also I would be interested in paying into a pension, but I am not sure what kind of percentages they are 15%?

Any help would be really good, as I am going into the unknown here and don't want to be worse off then I am now!:eek:

shmeeko69

It depends what type of a service your offering & what the demand is like in your niche or area of expertise.

If you are good at the job or service you offer then, even in the current economic climate you will get business, as the best form of advertising is still word of mouth & people will always trust or listen to someone who has previously used someone's services & has been satisified with their work.

Mark

Immaturity

henrygregory wrote: »

Hello, I am really thinking hard about going self employed.

I have worked out how much competitors charge for a slightly lesser service;

Around £8000 a year for 1 day of work a week. I can offer a much better service for the same price.
If I could get enough customers interested, I could work for my self all week, or work part time in my current job and do my self employed work on the other days I have free.

My question is, if I am charging a customer 8000 per day, is there any calculations I can make to work out how much I will take away with me after I have paid tax and ni? Also I would be interested in paying into a pension, but I am not sure what kind of percentages they are 15%?

Any help would be really good, as I am going into the unknown here and don't want to be worse off then I am now!:eek:

Well you get taxed by the turnover minus the expenses at the end of the year? It also sounds like you will have to sign up to VAT registration. It does sound like you need to visit a local business centre or at least a book advising you about how to go about this process.

schneckster

There are 2 ways of looking at this depending on the type of business you want: 1. Limited company; 2. Sole Trader

Limited Company: the word limited means limited liabilities. It means that if you !!!! something up and someone sues you, they can only sue the company and not you. Company assets are at risk and not your personal assets. Of course, if they sue on criminal reasons, then that all changes. Paperwork is complicated and you really need an accountant.

Sole Trader: the business and you are one and the same for reasons of tax and liability. Get sued and your personal assets are at risk. But the paperwork and accounts are easier.

Both versions only pay tax on profits. But with sole trader, it is easier to get the money into your bank account as you and the business are the same thing. Unlike limited companies where they are classed as completely separate and therefore, you are an employee!

Assuming sole trader, research what liabilities you could face and whether there are insurance policies to remove the risk. Public liability is the first one. If you find you can't mitigate the risk or insurance policies don't cover it, think about going limited.

After that, you simply add together what you've spent, and subtract that from what you've made to get your profit. If you're in a full time job as well, then your tax free allowance has already been used. So take 20% of your profit for income tax, and 11.5% for National Insurance.

A basic rule of thumb is to put aside 33% of anything you make for tax and NI... and you should get change!

If you are VAT registered, only do the above on VAT exclusive figures. VAT is calculated separately and isn't part of your profits as you are merely collecting it for HMRC.

If you do go Sole Trader, what you want is a large turnover, i.e., sales, but a small profit. Delay paying yourself for a month and let several invoices go in. When you do pay yourself, hopefully, you can pay yourself almost the full amount from the first invoice, and use the monies from the next 3 to operate, and so on the next week, etc.

Above all, remember there are plenty of places to get advice. HMRC are actually very helpful. They only get nasty if they think you're trying to fool them. Always be honest with them and they'll help you out if they can, and be sympathetic when you make a mistake.

Best of luck,

Schneckster

henrygregory

Thanks guys, lots of really useful advice. I will consider what has been posted. The good thing for me is that I already have two part time jobs, so I don't stand to loose too much if I just take on a little business to start.
As opposed to quitting both jobs and going self employed.

Thanks again for your time and help

schneckster wrote: »

There are 2 ways of looking at this depending on the type of business you want: 1. Limited company; 2. Sole Trader

Limited Company: the word limited means limited liabilities. It means that if you !!!! something up and someone sues you, they can only sue the company and not you. Company assets are at risk and not your personal assets. Of course, if they sue on criminal reasons, then that all changes. Paperwork is complicated and you really need an accountant.

Sole Trader: the business and you are one and the same for reasons of tax and liability. Get sued and your personal assets are at risk. But the paperwork and accounts are easier.

Both versions only pay tax on profits. But with sole trader, it is easier to get the money into your bank account as you and the business are the same thing. Unlike limited companies where they are classed as completely separate and therefore, you are an employee!

Assuming sole trader, research what liabilities you could face and whether there are insurance policies to remove the risk. Public liability is the first one. If you find you can't mitigate the risk or insurance policies don't cover it, think about going limited.

After that, you simply add together what you've spent, and subtract that from what you've made to get your profit. If you're in a full time job as well, then your tax free allowance has already been used. So take 20% of your profit for income tax, and 11.5% for National Insurance.

A basic rule of thumb is to put aside 33% of anything you make for tax and NI... and you should get change!

If you are VAT registered, only do the above on VAT exclusive figures. VAT is calculated separately and isn't part of your profits as you are merely collecting it for HMRC.

If you do go Sole Trader, what you want is a large turnover, i.e., sales, but a small profit. Delay paying yourself for a month and let several invoices go in. When you do pay yourself, hopefully, you can pay yourself almost the full amount from the first invoice, and use the monies from the next 3 to operate, and so on the next week, etc.

Above all, remember there are plenty of places to get advice. HMRC are actually very helpful. They only get nasty if they think you're trying to fool them. Always be honest with them and they'll help you out if they can, and be sympathetic when you make a mistake.

Best of luck,

Schneckster

missymugwump

henrygregory wrote: »

Hello, I am really thinking hard about going self employed.

I have worked out how much competitors charge for a slightly lesser service;

Around £8000 a year for 1 day of work a week. I can offer a much better service for the same price.
If I could get enough customers interested, I could work for my self all week, or work part time in my current job and do my self employed work on the other days I have free.

My question is, if I am charging a customer 8000 per day, is there any calculations I can make to work out how much I will take away with me after I have paid tax and ni? Also I would be interested in paying into a pension, but I am not sure what kind of percentages they are 15%?

Any help would be really good, as I am going into the unknown here and don't want to be worse off then I am now!:eek:

Do you mean you will earn £8000 per annum
Or that you will charge £8000 per day as you say further down your post
Because if it's £8000 a year you don't need to be VAT registered

And if it is £8000 a day tell me what you do I want to retrain :eek::T

henrygregory

missymugwump wrote: »

Do you mean you will earn £8000 per annum
Or that you will charge £8000 per day as you say further down your post
Because if it's £8000 a year you don't need to be VAT registered

And if it is £8000 a day tell me what you do I want to retrain :eek::T

Hi, thanks for your post.
Sorry, I didn't mean £8k per day, if only!
My current employer has got me into the habit, of working out how much I cost/earn per day.
When I began working for them, we were not sure how many part time days I should work, so we calculated on a per-day basis to get it to the amount I need.

Basically, in my current job, I earn just over 5k per day in a year.
If I can earn 8k per day in a year, then I am on a higher pay level which is good, and I am my own boss which I have always wanted.
I was just worried that I may fall foul of unknown tax percentages etc.

I would be charging £8,000 for a year, and for this, they would get me for a day a week for a year.
I would expect, to initially do two days, which would be a total of £14,000.
Would this go over the tax threshold?

I think someone else made a post earlier in the week saying I should really have a proper financial meeting with someone, and talk over this. I think that is a very good idea!

But likewise missymugwump, if you hear of any jobs going for 8000 por day, let me know, and I will certainly retrain!

missymugwump

I know of one that pays more and ...you don't even have to be good at .....football lol