Business tips for being self-employed

When it comes to finances, many self-employed people can feel overwhelmed. This is why accountants are here to help. Here are some business tips for being self-employed that can help keep your finances in tip-top condition and under control.

There are now many people in the UK who have chosen to work for themselves and become self-employed. In fact, information from the ONS (Office of National Statistics) states there were 5 million people self-employed by the end of 2019. This was an increase of 1.8 million in 2000. Not working 9-5 and having the opportunity to pursue a passion is one of the massive perks of self-employment. However, it also involves a lot of hard work, dedication and determination.

Keep copies of receipts

Ensure you keep a copy of every receipt that relates to your business. Although it can be easy to forget a receipt or mislay one when it comes to completing your self-assessment and expenses, you will be grateful you have kept them safe. If you use Xero or other cloud accounting, this process can be made a lot simpler.

Set up a separate bank account

This may seem like an obvious step, but it can sometimes be overlooked. As your business grows, business transactions will become more frequent and possibly more complicated as time goes by. This is especially true if you do not keep them separate from your personal transactions. It makes sense to be organised this way from the beginning as it will make completing your taxes a lot more straight forward.

Ensure you have everything you need to launch your business

There are several responsibilities to manage before you start your business. These include registering your business with HMRC and if applicable, Companies House, getting business insurance, purchasing assets and materials and much more. Getting everything in place to begin with can help get you started on the right foot. If you are unsure where to start get professional help to steer you in the right direction.

Register for self-assessment in time

Once you are self-employed, it is a requirement for you to complete a tax return for every year you are trading. The tax year starts on 6th April and the self-assessment tax returns will be due by the end of January after the tax year has ended. To avoid any penalties, you will need to register your business status by October before the January deadline. Try and register well in advance to avoid any hold-ups or potential delays. Also, ensure that you have the exact financial year-end dates in your diary so that no deadlines are missed.

Ensure your bookkeeping is tidy

It is important to get into the habit of good bookkeeping. Not only does it mean you are always on top of your finances, but it can also help you identify issues such as areas of the business where you are overspending, clients taking too long to pay etc.

It is a legal requirement to keep your records for 6 years.

Your accountant is always on hand to help you with your bookkeeping and can recommend systems and software to help. They can also help provide invaluable business advice to help your business grow.

Avoid spending all your income immediately

It can be a common habit for businesses to start spending their income as soon as it comes in. Although some spending is inevitable, it is important to keep some reserves to pay tax and also have enough in case unexpected costs occur. You can keep the money for income tax in a separate account if you want that separation.

Pay yourself a wage

Don’t forget to pay yourself. When people become self-employed it can be attractive to run the business for a few months without paying yourself and whilst this may make the bank balance look healthier, you need to never feel guilty about paying yourself a wage. When you are setting your prices, ensure you take into account the cost of your wage as well so you do not undersell yourself and your service. At the end of the day, you have set up this business by yourself and you need to be rewarded for your efforts.

Make the most of cloud accounting

Especially with more of us working remotely and from home, the use of cloud accounting has never been more accessible or necessary. Cloud accounting can allow you to have access to accounts across your devices, it can save you time and money in the long run, you have the reassurance that your accounts are secure, paperwork is reduced and collaboration and sharing are made easy. Your accountants will be able to assist you and provide more information regarding cloud accounting.

At Wright Vigar we work with different industries and businesses offering a range of services to suit each business need and ensure you keep on track of your finances. If you would like to discover more about how we can help you and your business please contact the Wright Vigar team.