Private Consultancy Work

Opus

Hi all,

I am in the field of engineering and wondering how I would go about offering private consultancy work to earn some extra income and build my experiences, to maybe even someday running my own engineering business. These might seem like some really basic questions, but would I need to set up a company to do this even if it was on a small very small scale? i.e. maybe a few small jobs a year. The consultancy could range from computer aided engineering work and problem solving for clients.

I would really appreciate some input and advice from others who know more about this, and maybe even have experience of this themselves.

Thanks

KiKi

Opus wrote: »

I am in the field of engineering and wondering how I would go about offering private consultancy work to earn some extra income and build my experiences, to maybe even someday running my own engineering business. These might seem like some really basic questions, but would I need to set up a company to do this even if it was on a small very small scale? i.e. maybe a few small jobs a year. The consultancy could range from computer aided engineering work and problem solving for clients.

You *could* set up a limited company, but if it's only for a very small few jobs it almost certainly won't be worth it.

You can operate as a Sole Trader instead. In short, you need to register with HMRC as self employed (you can be employed and self employed at the same time) - fill in the form online, and they will send you info about how to pay Class 2 and Class 4 NICs, which you're liable for as a self employed person.

Then you invoice clients (keep the invoices), keep receipts for all expenses, and complete a tax return at the end of the tax year. You don't need a separate bank account (and you certainly don't need a business bank account) unless you want one.

At the end of the tax year, complete your tax return online (easier than paper). You put in your earnings from employment, how much tax you've paid from employment in one section. Then in the next section you put in your income from self employment (total of your invoices), and your total expenses (total of your receipts) and HMRC work out what you owe.

This means that you need to put aside 30% of your earnings from self employment to pay your tax and Class 4 NIC bill at the end of the year.

If you are in the 40% tax bracket already (or will go substantially into it with self employment) then it may be worth setting up as a limited company. Then you pay corporation tax at about 20/21% (instead of income tax) and take dividends instead. If you take this option you need to register your company with Companies House, and submit accounts each tax year.

This is just the basics, obviously, but I hope that helps. Most people in your position will start as a Sole Trader just to see how they go, then go on to form a limited company if it's a successful business.

KiKi

colino

Book an appointment with your local Business Gateway/Link and they will let you know how easy it is to get up and running in this field. While planning and book-keeping are important, you really want to focus on the sharp end of the business, getting yourself known to as many (paying!) potential clients in your field.
Don't forget your professional indemnity insurance and make sure your business cards are decent ones. People hiring in professionals have seen all sorts, so don't let them know you are a start-up working from the spare bedroom. Good image, great presentation, knowledgable and skilled in the field and innovative and flexible. You'll need all of that to stay ahead of the pack.

Opus

Thank-you for your help and advice, sounds like the sole trader route would be the way for me to go initially.

I am worried about the expenses of all this and how long it might take to make a return on all the set up costs? Any thoughts on this?