Going self employed

[york away to this!]

Do it. I spent 20 odd years as a partner of a business and got royally ripped off by my rather fraudulent ex business partner.
Managed to squeeze out of that and set up on my own about 4 years ago with the help of my main client.
Now less reliant on them, use subcontract consultants for some of the work and have linked up with another business to offer a full service for larger projects.
In charge of my own destiny, pay taxes on time, have an accountant on a monthly retainer to do all the stuff I don't care for, have a great reputation and growing client base.

This time next year, Rodders...

 

[Mr Kobayashi]

Sole Trader = Self employed.
Limited company = director AND/OR employee of the business, you're not technically self-employed. A director takes dividends, an employee takes a salary

*A shareholder takes dividends. Directors are usually shareholders but they don't have to be, they can be paid a salary instead.

 

[GoatersLeftShin]

I was a contractor for 10 or so years and lived it. I also had a sizeable amount of other work on the go too and really enjoyed it. I'd say go for it if you think you can do it.

The only things I'd mention is DEFINITELY check out your IR35 status in terms of working for your old company.

Also as others have said, get a good accountant. Mine was awful and picked because they were the only ones available when I needed them. I was unlucky I had to get a company set up ASAP and needed an accountant. However their plain, awful advice cost me thousands. I'd recommend Warrs in Stockport they were spot on and knowledgeable. Also I found for contract work I liked umbrella companies as they take nearly all the risk from you

One thing I found hard, probably the hardest bit, was at one point I had too much work on and was in a position of working too hard but not having a guaranteed amount to take someone on. I also started seeing the person who became my wife too around this time so it was mental! Made a fortune and I think I really vouldve done well if I'd not settled down.

I loved the "buzz" of contracting and freelancing and would love to go back to it haha!

All the best with it though and hope the advice helps!

 

[Citizen of Legoland]

Interesting. Frying my brain a bit this.

Going to see my old man at the weekend. He worked for years as a self employed financial advisor so sure he’ll shed some light on this.

It sounds like a lot to take in but there are people to help you through it whichever way you go.

To simplify it all just think about IR35 because that might answer everything you need to know. Read up on the contractor forum link I posted. When looking for contracts, the end user (the company that needs the contractor) decides whether it is inside or outside of IR35, so if you see most contracts quoting inside then you may as well start off working through an umbrella. Most medium/large companies don't risk getting it wrong so err with 'inside' but smaller companies can be exempt so may be more likely to allow 'outside'. An outside contract just means you have the freedom to do the work your way, in your time and even allow another person to do the work.

By the way, your current company being taken on as a client is almost certainly going to be classed as 'inside' because if you are doing the same job as an employee (which you were) then HMRC might think something dodgy is going on.

 

[Citizen of Legoland]

*A shareholder takes dividends. Directors are usually shareholders but they don't have to be, they can be paid a salary instead.

Yes I should have been clearer but was trying to keep it simple.

 

[idahoblues]

Make sure you know where your money's coming from

 

[Cheesy]

If you want any (free) advice on your bookkeeping give me a shout :)

 

[idahoblues]

Oh another thing, get a bookkeeper

 

[flook]

It’s the tax / admin side I have absolutely no idea on.

Sole trader, limited company, vat registered or not etc this is where I am a bit clueless.

I’ve spent so many years being a payday millionaire at the end of the month!

The big issue, as has been mentioned, is IR35. If you are confident you can stay outside of that particularly bloodthirsty piece of flawed and mismanaged legislation, the Ltd Co is the way to go.

Taking dividends saves you the NI portion of stoppages, bearing in mind you will in effect be paying both employers and employees contributions, that can be a biggish number

Divi's are also taxed differently than salarys, and have historically been the better way of taking money, however that gap is being squeezed every budget.

Having your previous employer as your only (or main) client is a massive red flag to HMRC when it comes to IR35

If you go Ltd Co then definitely register for VAT. If you do this let your accountant handle it or you'll have to buy (expensive) software to make your VAT returns digitally, as is now the requirement.

If you can get your head around all the different hats you'll need to wear, it's the way to go. I've been working that way for over 30 years now and would never go staff.

good luck

 

[lancs blue]

Plenty of good advice on here, I'd throw in get a good accountant who knows the tax rules inside out. I've been either running a limited company or working as a sole trader for 25 years, my accountant saved me thousands, HMRC's inspectors didn't always fully understand their own rules, which came in very thick volumes.

Good luck.