The new era of high flying self employed workers? Reply

We want you

New research by the resolution foundation and reported by Start Up Donut states

The analysis shows that 60% of the growth in self-employment since 2009 has been in “privileged” sectors, despite them making up just 40% of the self-employed. The fastest growing sectors have been advertising (100% growth), public administration (90%) and banking (60%).

What we do know is that Self Employment has been growing in popularity as demonstrated by ONS statistics.

The level of self-employment in the UK increased from 3.8 million in 2008 to 4.6 million in 2015. While this strong performance is among the defining characteristics of the UK’s economic recovery, the recent rise in self-employment is the extension of a trend started in the early 2000s.

So why would you want to be a Freelancer.

      1. Pay rates – generally contractors are paid considerably more than employees
      2. Flexibility – you are your won boss but the downside is that you have to find work
      3. Tax – the following is from Contractor Weekly and is a quote from Seb Maley (QDOS)

“Operating through a limited company as opposed to an employee brings significant financial benefits. By taking a small salary and high dividends you pay far less National Insurance, saving around 26%. There are obviously associated costs involved in running your own company, such as accountancy fees and insurance, but the overall ‘take home’ pay will still almost certainly exceed that of an employee.”

https://stevejbicknell.com/tax-calculators/

We also have a growing ‘Gig’ economy

The ‘Gig’ economy describes the growing popularity of using workers on short term contracts on an on demand basis.

This type of work seems more popular with female workers

 

self-employed-chart

If you do become Self Employed ….

You’re responsible for:

What is a Limited Company?

A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.

Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.

steve@bicknells.net

Are you part of the ‘Gig’ economy? Reply

Concert Rock

The ‘Gig’ economy describes the growing popularity of using workers on short term contracts on an on demand basis.

gig

There of course several issues to consider:

  1. Are these workers really employees? or self employed?
  2. How should they be taxed?
  3. What rights should they have?

These issues are being considered carefully by the Office for Tax Simplification (OTS).

What we do know is that Self Employment has been growing in popularity as demonstrated by ONS statistics.

The level of self-employment in the UK increased from 3.8 million in 2008 to 4.6 million in 2015. While this strong performance is among the defining characteristics of the UK’s economic recovery, the recent rise in self-employment is the extension of a trend started in the early 2000s.

Full-time and part-time workers each account for around half of the rise in the absolute number of self-employed workers, but the growth rate of the part-time mode has been much stronger. Part time self-employment grew by 88% between 2001 and 2015, compared to 25% for the full-time mode. As a result, part-time self-employment accounts for 1.2 percentage points of the 1.6 percentage point increase in the self-employment share of all employment between 2008 and 2015.

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/trendsinselfemploymentintheuk/2001to2015

What is also interesting is the split between male and female

self-employed-chart

Statistically Self Employed earnings are lower than those who are employed, however, Self Employed earnings are masked by fluctuating work patterns and the use of tax planning for example cars and expenses.

What are your views on the ‘Gig’ economy? is it good for Britain?

steve@bicknells.net

 

Do you want to work for yourself? 1

group of successes people

4.75 million people are now self employed, thats 15% of all people in work in the UK.

Why become self-employed – Citizens Advice

There is encouragement from the government for people to become self-employed and at first it seems attractive, especially if you have recently become unemployed or redundant. Although one of the main attractions of becoming self-employed is no longer having to work for somebody else there are several disadvantages you should consider. These include not being certain of having a regular income, having to arrange your own sick pay and pension and probably having to work long hours.

What should you do before you start your business?

  1. Create a Business Plan – research shows it will increase your profitby 20%
  2. Create a cashflow forecast – work out how muc money you will need to run your business and where you will get the funding from
  3. Choose the right structure – its important to consider carefully whether to be a Sole Trader, Partnership or Limited Company
  4. Talk to an Accountant – Accountants will help you register and set up your business and avoid the risk of penalties
  5. Market Research – is there a market for your product or service, how big is the market and why will customers buy from you

Your responsibilities

You’re responsible for:

hmrc-expenses

 

steve@bicknells.net

 

Why are Freelance workers so popular with businesses? Reply

Why is it attractive to use Freelancers?

  1. Skill is more important than location in many business sectors – we live in world where the internet can allow you to work with anyone at anytime, you can now track down the best person to work with even if they live thousands of miles away
  2. Lower fixed costs – Using Freelancers will lower your fixed costs (in similar way to Zero Hours Contracts), you employ them for a specific project and only pay for what you need so there isn’t any surplus capacity
  3. Tax advantages – Freelancers run their own business and that means they pay less tax than employees. Employers save tax too, such as Employers NI.
  4. Competitive Advantage – You can put together a team for a contract rather than finding contracts that fit your workforce, this means you can hire the best.
  5. 110% Commitment – A Freelancers success and future work depends on them performing to the highest level on every contract, failure is not an option for a successful contractor.

 

invoice2go_freelance_stats_x2_v03

Graphic created by https://invoice.2go.com/en-us/
https://invoice.2go.com/en-us/

steve@bicknells.net

Can you start a business with no money? Reply

Business Startup word design

Recent surveys suggest that nearly have of start ups didn’t require any funding to get started, so how is that possible?

Here are some business models where it could work.

Subscriber based businesses

This can apply to many situations ranging from Networking and Memberships to Sky TV or Microsoft Office 365, get your clients hooked on paying a monthly or periodic payments and  it should work wonders for your cash flow.

High Demand Products

Any product in short supply creates a situation where clients are prepared to pay now in order not to miss out.

Pay In Advance

Often used in the home improvement market for example conservatories, kitchens, bathrooms, getting customers to pay a deposit or in some cases all the money upfront (or on finance) puts you in the best possible position especially if you can set up accounts to pay your suppliers on 30 or 60 days.

Market Place

Getting paid to bring people together is a great business model think of ebay, dating sites, or any on line market place where the owner gets paid when a deal is done.

Self Employed Freelancers

We are now in culture where freelancing is common

Working from Home

Here are my top 20 home based business ideas:

  1. Get a lodger – Under rent-a-room a taxpayer can be exempt from Income Tax on profits from furnished accommodation in their only or main home if the gross receipts they get (that is, before expenses) are £4,250 or less
  2. Ironing and Laundry Services – Always popular and you can start with friends and family
  3. E Bay Trading – as E Bay say… The first task is to sort through those bulging drawers and messy cupboards, finding stuff to flog. Get a big eBay box to stash your wares in, and systematically clear out wardrobes, DVD and CD piles, the loft and garage. Use the easy 12-month rule of thumb to help you decide what to offload: Haven’t used it for a year? Flog it.
  4. Blogging – Blogging has taken off and many businesses are looking for people to write blogs for them
  5. Candle Making – You can sell the candles on line and its easy to buy the wax and things you need to make the candles
  6. Car Boot Sale – As with E Bay but without going on line
  7. Cake Making – Make sure everything is labelled correctly and you comply with Health & Safety issues
  8. Data Entry – The internet makes it easy to enter data from where ever you are
  9. Social Media – Similar to blogging, businesses need help to manage Twitter, Facebook and Linked In
  10. Website Design – If you have the expertise, go for it
  11. Sales Parties –  Cosmetics to Ann Summers, there is a long list of opportunities
  12. Sewing and Clothes Alterations – Perfect before and after Christmas
  13. Jewellery – Making and selling jewellery is always popular and great for Christmas presents
  14. Car Repairs – Assuming you have the skills needed and comply with legal requirements
  15. Pet Care – Walking dogs or grooming is popular
  16. Virtual Assistant – Also personal organiser or personal shopper
  17. Wedding Planner – You could start by creating a blog about your expertise
  18. Direct Sales – For example Utility Warehouse
  19. Computer Repair – Great provided you have the skills
  20. Marketing – Telesales to leaflet design and freelance writing

steve@bicknells.net

What do you need to do to become self employed? Reply

Business people group.

First, you should create a business plan.

Approximately a third of all SME’s in the UK don’t have a Business Plan, that’s about 1.5m businesses, here are some reasons why you should prepare one….

  1. Research by Exact Software shows that SME’s with Business Plans make 20% more profit
  2. Having a business plan doubles your chances of increasing profits, increasing revenue, attracting new clients
  3. A well-researched business plan which includes the right figures and realistic forecasts will reassure potential investors you are a sensible investment opportunity
  4. A Business Plan will help you set out and achieve your goals
  5. It will help you set goals for your managers and staff
  6. The Business Plan will help you plan your cash flow and forecast Capital Expenditure
  7. A Business Plan will help you secure Business Finance and Loans
  8. You can plan your succession strategy or prepare the business for sale
  9. A Business Plan tests the feasibility of your business idea
  10. It will help you plan for the recruitment of Staff

Your responsibilities

You’re responsible for:

Ask an Accountant for Help with…

  • Choose the right business structure for your business – most businesses start out as sole traders but once they start making profits convert to limited companies, this is because sole traders pay more tax than company structures
  • Choose the best VAT Scheme you might be better off with Flat Rate or Cash Accounting
  • Choose the most suitable accounting software
  • Don’t mix up Business and Personal Expenses – always have separate bank accounts
  • Reconcile your Bank Transactions regularly – its easy to forget what you have spent checking the bank account keeps you in control
  • Understand and manage your cash cycle – how long does it take to get paid and what credit terms do you suppliers give you?
  • Manage customer payments and make it easy to pay your invoices
  • Understand and Comply with rules like National Minimum Wage and Holiday Pay
  • Understand and set money aside for Tax, don’t be late paying your tax

steve@bicknells.net

What expenses can the self employed claim? Reply

Business people group.

The UK has seen the fastest growth in self-employment in Western Europe over the past year, according to the Institute for Public Policy Research (IPPR).

There are many types of expense that you can claim and HMRC have just created a new guide…

HMRC expenses

http://www.hmrc.gov.uk/courses/SYOB3/syob_3_exps/html/syob_3_exps_menu.html

Pre Trading expenses

Many business owners incur in costs before they actually start in business. You can go back up to 7 years can claim costs as pre-trading expenses.

Let’s says you want to start a home based business, you need to create an office at home or build an office in the garden. This means that you have building costs as well as equipment costs before you start trading. These costs are submitted to the new business as an expense claim by the owner on the first day the business starts.

Also you might have legal cost for contracts or renting offices or equipment, you could have costs for product development, stock, samples, or even a motor vehicle.

You can check more about pre-trading expenses legislation.gov.uk or at HMRC.

However, what happens when you have paid VAT prior being VAT registered? You can reclaim any VAT you are charged on goods or services that you use to set up your business.

Normally, this will include:

  • VAT on goods you bought for your business within the last 4 years and which you have not yet sold
  • VAT on services, which you received not more than 6 months before your date of registration

You should include this VAT on your first VAT return. If you have doubts as to whether you should be VAT registered or not, take a look at VAT Notice 700/1: should I be registered for VAT.

Simplified or Actual Expenses

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs. You don’t have to use simplified expenses. You can just decide if it suits your business or not.

Simplified expenses can be used by:

  • sole traders
  • business partnerships that have no companies as partners

You can use flat rates for:

  • business costs for vehicles
  • working from home
  • living in your business premises

You must calculate all other expenses by working out the actual costs.

In order to find out which method works best for you, you can use the Government expense checker

Don’t forget Capital Allowances and the Annual Investment Allowance

Buying equipment, even if it’s on finance, is a great way to reduce your tax bill, the 100% AIA can be used on the date you buy the asset.

Currently, the Annual Investment Allowance is £500,000 and this has been reduced to £200,000 in January 2016.

It is not necessary to claim the maximum capital allowances available or even claim them at all, crazy as it might sound there are situations when not claiming capital allowances can reduce your tax bill!

Sole Trader Example

The personal tax allowance is currently £10,600 (2015/16)

Let’s assume profits are £15,000 and Capital Allowances available are £5,000, so that would reduce taxable profits to £10,000 which would waste £600 of the personal tax allowance.

It would therefore be better to only claim £4,400 in capital allowances and claim the remaining £600 in the following year.

Employers are saving £6k by opting for Self Employed Freelancers…

A survey by PeoplePerHour has shown that the self-employed segment of the labour market in both the UK and USA is growing at a rate of 3.5% per year – faster than any other sector. Should this growth continue for the next five years, researchers predict that half of the working population could be self-employed freelancers by 2020.

The survey also suggests that small businesses that hire freelancers instead of full-time employees could save £6,297.17 per annum. The survey shows that the average waste or spare capacity for each employee in a SMEs is 1.9 hours per day.

The research identifies a number of key drivers behind the shift from employment to self-employment, including “the availability of ubiquitous and inexpensive computing power, sophisticated applications and cloud-based services“. [Lawdonut]

steve@bicknells.net

Contact Us

If you are self employed have you tried the HMRC Simplified Expenses Checker? Reply

15081303234_3ff228fc8a_z

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs.

You don’t have to use simplified expenses. You can decide if it suits your business.

Simplified expenses can be used by:

  • sole traders
  • business partnerships that have no companies as partners

You can use flat rates for:

  • business costs for vehicles
  • working from home
  • living in your business premises

You must calculate all other expenses by working out the actual costs.

Costs you can claim as allowable expenses

These include:

Use this checker to work out which method is best for you.

What you need to know:

  • you’ll be asked to make estimates about some of your business expenses – you don’t have to give accurate amounts
  • this checker doesn’t give exact figures to use in your tax return, it gives you an idea of which way of calculating your expenses might be best for you
  • limited companies aren’t eligible

act now icon

Start now

steve@bicknells.net

Contact Us

How do you become self employed? 2

businesswoman is very multitasking

The UK saw the fastest growth in self-employment in Western Europe in 2014, according to the Institute for Public Policy Research (IPPR).

The number of self-employed workers rose by 8%, faster than any other Western European economy, and outpaced by only a handful of countries in Southern and Eastern Europe.

The IPPR’s analysis shows that the UK – which had low levels of self-employment for many years – has caught up with the EU average. If this growth continues, it says, the UK will look more like Southern and Eastern European countries which tend to have much larger shares of self-employed workers.

Your responsibilities

You’re responsible for:

Naming your business

You can use your own name or trade under a business name – read the rules for naming your business.

You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters.

When should you get help from an Accountant?

Often business owners wait too long before they realise that they need help from an accountant.

Key reasons are:

– not understanding the difference between a book keeper and an accountant
– thinking that an accountant will just be an extra cost – the reality is that most accountants will save the business many times their cost
– thinking that accountants are just bean counters.

But if you choose a qualified and experienced accountant they can bring huge benefits: management tools to improve profitability, cost controls, tax savings, growth strategies, business planning, business structures and much more. So don’t wait too long – getting an accountant should be a priority for all businesses!

Common Mistakes

First off – not having a separate bank accounts. Many start ups try mixing business and personal transactions in their personal bank accounts, its a total nightmare, don’t do it, get a business bank account. Mixing things up will almost certainly have tax implications.

Not registering for tax or filing returns is another one. Getting things right at the beginning is extremely important and a CIMA Accountant can make sure that you choose the right business structure and will help you register for VAT, PAYE, CIS and other taxes. Choosing the right VAT scheme will save you tax. Not registering and filing returns will have severe consequences and lead to fines and penalties.

Also – contract mistakes. Ask your Accountant to review your contracts, they will be able to give you lots of useful tips.

Running out of cash: draw up a Budget and Cashflow and forecast how much cash you will need to run the business, looking at your cash cycle and managing it will be vital. If you need funding ask your Accountant for help, they will be able to look at all the options and help you choose the option that’s best for your business.

Accounting – many start ups fail to keep control of their accounting, by working with an accountant and using Debitoor or Sage One you can avoid this problem.

 

 

steve@bicknells.net

Contact Us

Online traders targeted by HMRC 4

Online Shopping

The Revenue has sent 14,000 letters to traders suspected of running a business and failing to declare this on their tax returns.

Of these, 1,000 letters are being sent to people where the taxman has already identified a shortfall on their self-assessment forms.

Some of those targeted make as little as £100 profit online.

It was reported in the Telegraph that eBay, Etsy, Amazon and Gumtree are being forced to hand over customer account details, including their selling activity, as part of the taxman’s legal powers that were extended last year.

The criteria used to assess if an activity is a hobby or a business are:

  • The size and commerciality of the activity.
  • The frequency of the activity and transactions
  • The application of business principles.
  • Whether there is a genuine profit motive.
  • The amount of time devoted to the activities.
  • The existence of arm’s-length customers (as opposed to just selling your wares to family and friends).

HMRC have some great examples to help you decided, for example

Gail is a full-time employee working for a stationery company. She pays her PAYE tax on this employment every month.

In her free time Gail makes cushions and uses most of them in her home. Occasionally she sells them to friends and work colleagues for an amount that just covers the cost of materials of £15. Sometimes she makes a loss. Any money she does make goes towards her holiday fund.

She decides to make extra cash by selling cushions on an Internet auction site and starts auctioning three or four to see how they go. They all sell for more than £50, a profit of at least £35 each.

She uses this money to buy more materials and within a month she is selling around ten cushions a week, always at a profit, and is considering setting up her own website.

Gail’s initial sales of cushions to friends are not classed as trading. It lacks commerciality and she does not set out to make a profit. The occasional sales are a by-product of her hobby. Once she begins to auction her cushions, she has moved into the realms of commerciality.

She is systematically selling her goods to make a profit. She will need to inform HMRC about her trade, and keep records of all her transactions. On the level of sales shown in the example the potential turnover of around £26,000 is well below the VAT annual threshold so Gail does not need to register for VAT.

Many traders start off in a small way and don’t realise that they need to register with HMRC, they assume their activity will be treated as a hobby, but things can grow quickly.

You should register as Self Employed as soon as your hobby becomes a commercial venture, even if you are losing money!

If you don’t register, HMRC will be looking for you and if you have an online business it won’t be hard for them to find you.

steve@bicknells.net