To be self-employed means that you earn an income through your own business. The success, or failure, of this business is your own responsibility, and you can decide how, where, when, and with whom you work.
To be classed as self-employed, you’ll either be a sole trader or a partner in a business partnership. You can still work for yourself if you own a limited company – but technically, your limited company will be your employer (even if you’re the only person running it!).
What are the advantages of being self-employed?
You can fit your work around your own schedule, rather than fit into a specific working setup, or have to apply for flexible-working arrangements, as an employee would need to do
Diversity of work
As you can work for a number of customers at one time, you can choose to enjoy workdays filled with a variety of projects
Instead of being paid a wage that an employer would fit to a role, you can charge your own fees based on your own unique skillset and experience… which may well mean you take home a bigger amount than you would if you were working for someone else who takes a proportion of the fee you’d otherwise earn.
There can be a number of tax benefits (including deducting your relevant expenses) that may help you – take a look at our guide to Tax 101 for the self-employed for the essential detail here.
More time to work (or relax!) and less time commuting
We waste a lot of time commuting. Time that could be spent finishing something earlier and then having more time to relax, perhaps?
And the disadvantages?
Lack of stability
As a self-employed person, you might not have the same level of job security that an employed person has, which can lead to financial uncertainty. It might also impact your ability, for example, to rent a property, get a mortgage, buy a car, or get an overdraft, as easily as if you were an employee.
You’ll probably need to contribute your savings to getting set up – and they will often be your only safety net if or when your profits take a dive. So, you’ll need to be sure that you can manage through periods or little to no income.
In addition to working for your clients, you also need to ensure that your marketing, taxes, admin, and more are kept up to date, or instead pay for someone to do these extra tasks for you – which is an additional cost you should factor in at the start – both a financial one and a time commitment for you. That’s time when you won’t be working on the business activities that bring in the money.
Sales and marketing can be especially time-consuming, and tiring, especially in the early days when you are still building your business reputation. People who start a business around a skillset or activity for which they are already known typically find this challenge easier than those who have less relevant experience.
By law, employees must receive certain statutory benefits from their employer, which a self-employed person isn’t entitled to.
If you want to take time off work, or set up a pension, for example, you need to pay for these yourself. If you’re sick, you’ll need to think through what that means for your customers’ expectations as well as the impact to your income position.
Make sure you have good insurance in place
And if you’re contemplating any life-changing events, like moving house, starting a family (or extending your existing one) or taking on caring responsibilities, figure out how you’ll factor these in to your business plans. They can have a more disruptive impact than might immediately appear to be the case, especially if you run your business from your home, or you need to travel a lot for client business, or work outside typical office (and school or nursery) hours.
You might work in an environment where you’re constantly interacting with others, but many sole traders can work on their own a lot and miss team camaraderie and support. Make sure you’ve considered how you’ll feel about this and how much it might impact you.
Working out of a co-work venue can be a great way to counter loneliness – and, potentially, to pick up new customers too! It may be a good way to enforce a discipline of work-life balance as well, enabling you to step away from your work environment and not fall into the trap of never completing switching off; which is a more common risk when you’re working from home.
Of course, there are disadvantages to most situations, so you needn’t let this put you off!
A little research, careful planning, and legal help if you need it, will help your business get off to the best start.
To find out more, take a look at our guide: which business model is right for you?
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