Sole Trader - Gaps in my Knowledge?

LittleMonkey16

Hi everyone

I'm hoping that some of you may be able to help me out. This is a bit of a long one, but I'm hoping some kind soul with a taste for moaners will hear me out!

I took voluntary redundancy about a year ago. Very long story, but the upshot was that I have a mental illness and the situation at work was becoming totally untenable.

Shortly afterwards, I decided to register as a sole trader, providing written services (proofreading, copywriting etc) on a freelance basis. No big dreams or aspirations, just to make a bit of pocket money. I'm not even sure how permanent this is going to be - once I really get my health back I'd like to re-enter the workplace. At the moment I have a wonderful OH who is taking care of me while I give this a try and also work on some writing projects that had been on the back-burner, too.

So I've put myself together a decent website and social media presence, registered as self-employed on a 'sole trader' basis with HMRC etc. My earnings so far have been pathetic (well within the parameters for the NICS exemption), but I've decided to pay Class 2 NICS anyway, because I don't want to fall behind with that while I'm freelancing, particularly as I don't have any company pension to fall back on. Class 4 NICS obviously aren't an issue for me right now, neither are Capital Gains or VAT or any of that. So I figure I'm ticking all the boxes vis-a-vis tax and HMRC. I've already completed one self-assessment successfully, thanks in no small part to help from MSE contributors!

My biggest worry at the moment is insurance. I simply can't afford it - I'm hardly earning anything. I don't have clients come round, and I don't go to their homes either (I'm all online, no employees, no stock held at home or anything that wouldn't be there if I were otherwise employed). But I'm terrified of what will happen if I come across a particularly litigious client. I can't imagine it's all that prevalent in my line of work, but still. How much of a risk am I really taking here? I issue a terms and conditions document with every quotation (which makes it clear that when a client pays for completed work they are saying it's acceptable to them etc), and work is undertaken firmly on the understanding that this has been agreed to by the client - but I know that wouldn't hold much water if I came across a real bad 'un. I've no assets and most kids earn more in pocket money than I do from this gig, so suing me would probably be fairly futile anyway. But I know I wouldn't survive any more upheaval. Not right now, anyway.

I also live in a rented flat, and I'm worried about whether I'm getting myself into trouble on that score, too. I've got no stock, and I dont really have an office as such (we have a second bedroom with a computer in it that was there before I was even made redundant, so there is no evidence to suggest that a 'business' - if you want to call it that - is even being run here). I don't know whether I'm allowed to do this or not. Should I be paying business rates etc? Am I meant to have some sort of trading licence for what I do (I'm not selling alcohol/tobacco or any tangible 'product', I don't have a stall or anything)? I can't imagine that only people who own their own homes work for themselves?

I'm just getting in a bit of a state over 'what-ifs', and I could really use some reassurance and/or information. My condition means that I catastrophise habitually (it's 2.15am and I'm on MSE asking about this, which I guess tells you something!), but I always feel better with a bit of knowledge. I've tried Business Gateway but they've just given me pretty vague information which, in some cases, has proved worse than useless.

If anyone can help I'd be so grateful.

gb12345

LittleMonkey16 wrote: »

So I've put myself together a decent website and social media presence, registered as self-employed on a 'sole trader' basis with HMRC etc. My earnings so far have been pathetic (well within the parameters for the NICS exemption), but I've decided to pay Class 2 NICS anyway, because I don't want to fall behind with that while I'm freelancing, particularly as I don't have any company pension to fall back on. Class 4 NICS obviously aren't an issue for me right now, neither are Capital Gains or VAT or any of that. So I figure I'm ticking all the boxes vis-a-vis tax and HMRC. I've already completed one self-assessment successfully, thanks in no small part to help from MSE contributors!

Sounds like you've covered yourself from the tax side of things.

LittleMonkey16 wrote: »

My biggest worry at the moment is insurance. I simply can't afford it - I'm hardly earning anything. I don't have clients come round, and I don't go to their homes either (I'm all online, no employees, no stock held at home or anything that wouldn't be there if I were otherwise employed). But I'm terrified of what will happen if I come across a particularly litigious client. I can't imagine it's all that prevalent in my line of work, but still. How much of a risk am I really taking here? I issue a terms and conditions document with every quotation (which makes it clear that when a client pays for completed work they are saying it's acceptable to them etc), and work is undertaken firmly on the understanding that this has been agreed to by the client - but I know that wouldn't hold much water if I came across a real bad 'un. I've no assets and most kids earn more in pocket money than I do from this gig, so suing me would probably be fairly futile anyway. But I know I wouldn't survive any more upheaval. Not right now, anyway.

Obviously, it depends on who your clients are, but you are leaving yourself open to the possibility (probably remote) of being sued for things like breach of copyright (even if it is unintentional), which is something that Professional Indemnity Insurance would protect you from.

LittleMonkey16 wrote: »

I also live in a rented flat, and I'm worried about whether I'm getting myself into trouble on that score, too. I've got no stock, and I dont really have an office as such (we have a second bedroom with a computer in it that was there before I was even made redundant, so there is no evidence to suggest that a 'business' - if you want to call it that - is even being run here). I don't know whether I'm allowed to do this or not.

You would need to check the terms of your lease, but I can't see that any landlord would object to you working from home doing what you do.

LittleMonkey16 wrote: »

Should I be paying business rates etc? Am I meant to have some sort of trading licence for what I do

No need for either of these.

PlutoinCapricorn

Business rates only apply when you convert part of your home to business use only: a clinic, a photography studio, a stockroom are examples of this.

If you cause a nuisance with deliveries, customers who take the parking spaces, noise or store huge amounts of dangerous materials you may expect complaints and may be breaking the terms of your lease, but working online or at a desk is no problem as you are not doing anything you wouldn't do for personal reasons.

You don't need licences as you are not selling things in the street.

It seems that insurance is the only thing to worry about.

Mistral001

Have you discussed this with your doctor? No matter what you may think freelancing is still a business and still very competitive.

terra_ferma

LittleMonkey16 wrote: »

I took voluntary redundancy about a year ago. Very long story, but the upshot was that I have a mental illness and the situation at work was becoming totally untenable.

Depending on your personal situation going freelance may or may not be the right thing for you.
Being self-employed can be very stressful, mainly because you have no fix income coming in, so you have to be very strong, mentally and physically. The advantages are numerous, nobody tells you what to do, and you are master of your own destiny.

LittleMonkey16

Thanks for all of this.

I think the only problem would appear to be insurance. Perhaps I should start looking around for some quotations. I know MSE already has a stack of threads and other information on possible providers so I'll raid those. I've no idea how I'm going to afford it, but then if I can't afford insurance I certainly can't afford to get sued.

As regards the competitiveness of freelancing, I'm not really intending this as a source of a full-time income. This is really a way of making a very small amount of money to help our overall household income and to build my confidence while my health improves. We're not in any way dependent on my income, so even if I made zilch, nothing terrible would happen to us. As I said in my original post, I have the incredible good fortune of a very supportive OH. I wanted to be doing something during this time - being 'unemployed' was an option, but I don't think that would be great for my health and self esteem either, to be honest. The truth is that I am a strong person (I've had to be), and being totally and utterly unproductive just doesn't suit me. It looks like this insurance issue may make it a necessity, though. We'll have to see.

PlutoinCapricorn

Going systematically through the different aspects of self employment as you have done is very good practice. VAT and Class 4 NI may apply later if you get a lot of well paid work, but you can certainly forget about them for the moment.

Paying Class 2 NI when you could claim exemption because of future benefits seems like a good decision.

If you have managed to complete one tax return successfully the worst is behind you.

Eliminating possible requirements is an essential part of the operation: hygiene certificates and permission from the local council may be needed for cupcake baking, but not proof reading!

Insurance probably is the only remaining area of unfinished business. Some freelancers do not have any because of the nature of their work, the fact that they operate on a small scale and do business with their own contacts. Is there a forum for people in your line of work where this is discussed?

LittleMonkey16

PlutoinCapricorn - I'll look into that. I'm assuming there must be some fora where career writers, bloggers etc go to tear their hair out like I'm doing! I do try to cover myself as much as possible as I work (I do have terms and conditions, but I'm not naive and I know these will be of little use in the face of someone who was determined to sue).

I have only just got myself out of debt and I think I'm just a bit scared of having to find money I don't have. Again.

PlutoinCapricorn

A lot of insurance seems unnecessary to me. It makes sense if you are a window cleaner, or financial advisor who deals with huge amounts of money.

http://www.procopywriters.co.uk/forum/

PlutoinCapricorn

http://writing-community.writersworkshop.co.uk/forum.html

Mistral001

Just a point about PII. You need to keep it in place for 6 years after you finish stop your career as a freelance writer/blogger (not quite sure exactly what you do). That means if you decide to only work one year you need to pay for 7 years insurance premiums. You get a reduction in premiums in the six-year run-off period, but a factor worth bearing in mind.

Of course if you do not get insurance you will still be liable to be sued for anything you do for six years after you finish anyway.

I am speaking from experience BTW.