Going self-employed

laffinggravy

Lots of questions coming so will try and keep the intro brief and to the point:

I'm currently among the thousands of people being employed in an office job I don't like. Reasonable wage, no job satisfaction, demoralising etc...

I currently have one small business - a hobby business if you like working a few hours on a weekend now and again. Only brings in about £2000 a year but it's a bit of fun. But I love doing it and enjoy the business side of things which has surprised me. So....

Thinking about gradually becoming self employed by going part time in my job and starting up a few other small self-run businesses. I have 4 businesses in mind, all of which are in the service industry and will involve minimal start up costs/running costs.

So onto my questions:

1. Do I register each business separately? The businesses are not really related and I would need a different name for each of them. Not sure where I stand with that.

2. Tax. I'm going to speak to an accountant but is there anything in particular I should know when running multiple business and being employed?

3. This is a hypothetical question and will be impossible to answer accurately but a ball park figure would be nice...Let's presume for convenience sake that I currently earn £20,000 a year before tax and I don't want my salary to drop below this. If I were to halve my hours in my employment and earn £10,000 before tax, what sort of target would I need to be setting myself for my self employment? I understand that it would be more than an extra £10,000 as I will have to pay more taxes etc... Like I said, the running costs are minimal (basically just the set up of 4 websites - my partner currently works from home so bills won't be much higher and travel costs will be about the same as my current commute).

4. What other questions should I be asking ; )?

Thanks in advance....

phill99

If you set your self up as a 'sole trader', then you need register as self employed with HMRC. They may ask for you trading name. But they will treat all income derived from all of your businesses as one income, and then allow you to offset the appropriate deductions (running costs, costs of goods, stationary, postage, office maintenance etc) from all your businesses. It's how much you have totally earned and how much you have spent in total that the HMRC are concerned with. Remember you won't get any personal allowance on the self employed part of your income as this will already be accounted for by your employer. Normally, you will at less tax as self employed as there are a lot of business running costs you can set off against it.

leelovesdeals

I would recommend starting as self employed rather than running each as a Ltd company. With a Ltd company there are more costs involved as you'll need to file accounts each year which generally means employing an accountant to help you (costly).

I'm not sure of the nature of your businesses but I would recommend that perhaps rather than starting 4 business that you focus on just one, make that one work and then start the next. I'm just wondering whether being part time and running 4 businesses may overstretch you.

In terms of tax you would pay tax at approx the same rate if you are self employed. You will however need to pay class 4 NI http://www.hmrc.gov.uk/working/intro/class4.htm

Just remember to have a savings account for the tax you will need to pay. It's all too easy to think that you're better off than you actually are and then the tax bill comes through!

Good luck!

laffinggravy

Thanks for the input.

As far as over stretching myself, I can see why you may think that running 4 businesses (5 with the one I already do in my spare time) and being employed would be a stretch but the nature of the businesses mean that it could well be achievable. Without going into too much detail I'll explain why:

Business one is a website that will involve quite a bit of work to set up and get running, but if it works as well as I hope and believe it will, it will bring in about half of my required salary with very little to do - basically just website maintenance and a lot of emails. It does involve getting a lot of contacts and getting buy in from other people, but I already have a lot of the contacts and have had quite a bit of interest when I have put out some feelers.This is the first one I plan on doing and I won't reduce my hours until this is either bringing in a regular income or I have come to terms with the fact that it isn't going to work!

Business 2 is a music tutorial service. This is something I have done before and I know I can make money from it and that there are many potential clients out there in my area. However, it's not something I am passionate enough about to do as my primary job but I would gladly take on a few clients at a time for weekly hour lessons. This is something I would prefer to enjoy in small doses but could fall back on more heavily if other businesses are not going well.

Business 3 is a performance service that I would be able to fit in a couple of evenings a week and would enjoy. Again, this is something to fall back on if other business is slow, but it would also be something I could really choose my own hours for.

Business 4 is a web design business and could potentially bring in the most income but I am very aware of the amount of similar businesses out there and would be happy to get one small client a month to start with. I have written out a very rough and hypothetical business plan that highlights how much work I would need to get from each business to match my current salary and I have not included this due to the risk of not being able to get the work. I would consider this a bonus, yet due to the nature of the other businesses I would be in a position to prioritise this work if it was to come in as it is the most lucrative. This would be the most long term plan but it I think it would also take the longest to build up a regular client base that would come back for repeat work.

martindow

As you have an existing business it sounds as if you should have told HMRC already and be filling in tax returns for this.

I don't know what others think, but I would be inclined to come clean about your self employemnt although HMRC could apply penalties and present you with a bill for previous tax years.

laffinggravy

I am already listed as self employed and pay tax on my current business. I was questioning if I should continue to trade as self employed using multiple business or bring them all under one umbrella - well, basically wanted to know what the options were and if what the recommendation is. Apologies if I didn't word it correctly or gave the wrong impression.

martindow

laffinggravy wrote: »

I am already listed as self employed and pay tax on my current business.

Apologies for misunderstanding your situation! All the best for your new ventures.

paddyrg

laffinggravy wrote: »

... if I should continue to trade as self employed using multiple business or bring them all under one umbrella ...

Well, they kind of are under one umbrella - you! The fact there's only one tax return means they are all interconnected - a loss in one can be offset by profit in another (from a tax position it is one big fund). This is both a good and a bad thing - it means if one of your businesses is sued for something, they can all be brought down.

If you are ready to spend some money, you could run them as 5 separate ltd companies. That would mean each was a separate entity in itself, and you personally would be isolated from any company getting sued (or any other problem) - but it means more tax returns to worry about. It means some could be VAT registered, others not, and they're individually easier to sell.

If they're turning over pocket money, ltd will be more expensive, but there are other benefits.

paulwf

Worth a read:

http://hiutdenim.co.uk/blogs/story/4800102-do-one-thing-well

Do one thing well

We make jeans. That’s it. Nothing else. No distractions. Nothing to steal our focus. No kidding ourselves that we can be good at everything. No trying to conquer the whole world. We just do our best to conquer our bit of it. So each day we come in and make the best jeans we know how. Use the best quality denims. Cut them with an expert eye. And then let our ‘Grand Masters’ behind the sewing machines do the rest.

There is a great deal of satisfaction to be gained from making something well, of such superior quality that you know it is going to stand the test of time. It makes the hard work and the obsessing over each and every detail worth all the effort. That’s our reward. That’s why we stick to just making jeans. Yup, we just make jeans. That’s all folks.