Being self-employed can be a great way to earn some extra income, diversify your revenue streams, or simply test how viable is that seemingly awesome business idea you have. Self-employment can be incredibly flexible and could be successfully established in just a couple of steps. Indeed, according to official statistics, there are over 4.2 million people in the UK, or around 13% of the entire labour market, working in self-employed businesses.
Unfortunately, even if you are completely ready to start your self-employed business, you should still consider the global environment and economic situation carefully to determine if this is indeed the right moment to do so. In 2022, the bankruptcies in the UK reached highs not seen since the global economic crisis back in 2008, and experts project that the number of failed businesses will remain worryingly high in 2023 as well.
To avoid becoming part of this unenviable statistic, it may be for best to consult with a professional accountant. Firms. can provide invaluable expertise and advice when it comes to not only setting up your self-employed business, keeping it tax compliant, and having its bookkeeping in order, but also help you prepare for the challenges expected in 2023.
2203 Could Offer A Challenging Economic Situation
Starting any business could be a tough task unless the economic conditions do not start to improve through the rest of the year. Self-employed businesses are even more susceptible to adverse external factors as these business structures rarely have sufficient emergency funds to keep them going through a period of high costs and reduced demand. Depending on the sector you plan to operate in, you may need to do the maths and determine what impact might the high inflation, the cost of living crisis still gripping the UK, the soaring energy prices, or any potential shipping disruptions have on it. To avoid any unpleasant surprises down the line, make sure to research the current state of the chosen sector extensively and get as much professional advice as you can. Seek out other self-employed people, especially if they also work in the industry you are planning to join. Ask them about the state of their business and any challenges in particular that they have had to deal with recently or expect to encounter later in 2023. However, don’t forget that running a business will likely impact your entire lifestyle, so ask about how being self-employed has impacted their personal lives or
its effect on their mental health.
Setting Up A Self-Employed Business in 2023
The vast majority of self-employed businesses operate as Sole traders. This is the simplest business the structure that comes with several clear benefits. The entire process can be completed relatively fast as there are only a few requirements. However, being a Sole trader comes with some important caveats. Under this business structure, there is no distinction between the assets of the business and its owner. In practice, this means that any debts incurred by the business could materially affect your own finances and assets. Such risks could be reduced significantly by taking on appropriate insurance. If a Sole trader doesn’t seem right for your planned business, you may explore other options, such as establishing a Limited company or a partnership.
Legal Requirements
If you start conducting business as self-employed, there are several requirements that must be followed. It will be necessary to register with the HMRC (HM Revenue & Customs) and start paying your income tax and National Insurance (NICs). You can do this at any point before 5 October of the second tax year of your company. What forms may need to be submitted will depend on the personal circumstances – have you previously submitted a self-assessment tax return, is this your first sole trader company, etc.?
Depending on the reported income, sole traders may also have to pay Class 2 and Class 4 NICs. For the 2022/3 tax year, Class 2 is set to £3.15 a week. However, if profits for self-employment are below£6,725, no Class 2 NI contributions will have to be paid. As for Class 4, its rate varies depending on the reported annual profits – 10.5% for profits between £12,570 and £50,270 and 3.25% above that threshold.
It is also necessary to pick a name under which you will be conducting your business operations. Thisbe your own name, and no registration with Companies House is necessary. Still, you might want to check if someone isn’t already running a company under the same name, as this could lead to potential legal problems.
