Should I go self-employed?

There are plenty of reasons to go self-employed: you get to ‘be your own boss’ and work more flexibly and depending on your industry you may be able to command a much higher rate than the salary you’d be able to achieve as an employee. But there are downsides too, and when you’re thinking through being self-employed there’s lots to take into account.

Is self-employment right for me?

There are pros and cons to being self-employed, and when you’re thinking about being self-employed vs. being an employee there are a number of things that you need to consider, including:

Do you have some money to set yourself up?

Would you be able to cope with periods of little or no income?

Do you feel confident about managing your own business, for example managing cashflow, keeping thorough records and completing tax returns? Have you thought through the impact of losing employee benefits, for example holiday pay, sick pay, and employer pension contributions?

Do you have a space where you’d be able to work, and any equipment you need, or do you have budget to buy it?

Do you have any life-changing events to take into account, for example an upcoming house move, wedding or new baby?

The advantages of being self-employed

There are plenty of perks of being self-employed, including:

You have more flexibility and control, so it may be easier to fit your work around other commitments and responsibilities, including childcare.

Your work can be more varied, as you may be working on several different projects for different clients at any one time.

You can explore your creative and entrepreneurial side as you build your own business.

You can deduct certain costs – travel and some utilities bills, for example – from your income when you’re calculating your tax liability.

You may have the potential to earn more money, as day rates for self-employed consultants and freelancers tend to be much higher than salaries.

The disadvantages of being self-employed

It’s important to take into account the disadvantages of being self-employed too, in particular the risks and costs that come with self-employment, for example:

There are likely to be some start-up costs, so you may need some money to get started.

Your income isn’t guaranteed, which can sometimes make it hard to keep up with rent or mortgage payments, loan payments and living expenses.

You bear the responsibility for the failure or success of the business, so you don’t have much back-up if things go wrong.

It can be more difficult to get approved for renting property, taking out a mortgage or getting a loan when you’re self-employed.

You need to deal with the admin side of your business, which involves bookkeeping and complying with regulations.

If you take a holiday or can’t work, you won’t get paid.

Going self-employed for the first time

When you’re going self-employed, there are several things you need to do, including telling HMRC that you’re self-employed for tax purposes, thinking about the business structure (which has an impact on the paperwork you’ll need to complete), and sorting out insurance.

Going self-employed checklist

When you go self-employed, you’re effectively setting up a business, even though you might not see it that way. This means that you need to decide on a business structure. We’ve taken an in-depth look at setting up as a sole trader – usually the simplest business structure to choose when you go self-employed. However, you may also decide to incorporate as a limited company.

Starting a limited company

If you’re starting a limited company, there are certain things you need to do, including registering with Companies House, drawing up a memorandum of association, and paying corporation tax. Take a look at our article on sole traders vs. limited companies if you’re not sure about the differences between these business structures. Where is this article sole traders vs. limited companies?

Starting up as a sole trader – If you’re going self-employed in the UK as a sole trader, these are some of the things you need to do:

Tell HMRC that you’re self-employed, so that they know you need to pay tax through self-assessment and pay Class 2 and 4 National Insurance contributions. Go to the government’s website to register or look at our article on registering as a sole trader with HMRC for more information.

Set up a business bank account. If you’re struggling to pick a provider, use a comparison site and look at their ratings.

Establish a process for recording your profits and evidence of your business expenses. This will make it much easier when it comes to completing your HMRC tax return.  In simple words – keep your all receipts and bills! And review the information here to help:https://www.gov.uk/expenses-if-youre-self-employed

If you’ll be working from home, check your tenancy agreement or mortgage agreement to make sure you’re not contravening any terms. You may need to notify your landlord or mortgage lender.

Sort out your insurance. Professional indemnity insurance and public liability insurance are the main types of business insurance to consider, but there are plenty of other covers too, and if you’ll be employing anyone, you’re usually legally obliged to have employers’ liability insurance.Think about your pension. Since you won’t be paying into a workplace pension any more, it may be a good idea to set up a private pension so that you’re still putting money aside for retirement. Although you won’t benefit from employer contributions, you’ll still get government contributions into your pensions in the form of tax relief. 

Paying tax when self-employed:  how much will I pay?

How much tax you’ll pay as a self-employed person will depend on how much money you’ve made and the ‘allowable expenses’ you’ve incurred in the course of your business. Certain business-related expenses can be subtracted from your income when you’re calculating your taxable profit.

The tax-free personal allowance and the tax bands are the same for self-employed and employed people, so for 2024-25 you can make up to £12,570 before you need to pay tax. You’ll then pay the basic rate of income tax (20%) on income up to £50,270. The higher rate of 40% applies to income over £50,270, and on income over £125,140 you pay the additional rate of 45%.

The deadline to pay your tax to HMRC is end of January each year. You can assess your tax often and pay it monthly or quarterly.

Self Assessment tax returns: Deadlines – GOV.UK (www.gov.uk)

Going self-employed but working for a company

Of course, you may be going self-employed part time and continue working for a company during the rest of the week.

This means you’re both self-employed and employed, and you’ll pay tax through both PAYE and self-assessment.

You could also be self-employed but only work for one company (for example if you have a single major client), but in this case HMRC will be keen to make sure that the company isn’t just calling you ‘self-employed’ to avoid paying National Insurance contributions and giving you employment rights. To count as self-employed you usually need to have choice over when and where you work and you’ll usually be paid when you issue invoices. Check the government website or speak to an accountant if you’re not sure. 

Being self-employed and getting a mortgage

One of the disadvantages of being self-employed is that it can be more difficult to get a mortgage, but it is possible.

When you apply for a mortgage and you’re employed, the lender will usually confirm your income by asking for payslips and bank statements. When you’re self-employed, you’ll usually need to provide business accounts including a copy of your self-assessment tax return forms.

Lenders often ask for between two and three years of accounts, so you may not be able to get a mortgage if you’ve only just become self-employed.

Usually, the lender will take an average of your income over the last two or three years to calculate how much they’re willing to lend you. They may also ask to see other documents – business plans, for example – to check that they’re confident you’ll be able to keep up with the mortgage repayments.

Self-employed allowable expenses

In terms of what you can subtract from your income when you’re figuring out the self-employed profit that’s taxable, the list includes business insurance, part of your utility bills if you work from home, office costs, stock and certain business-related travel. Check the government website carefully though, as you could get in trouble with HMRC if you subtract something that’s not an allowable expense, or if you don’t have evidence of the expense.

Self Assessment tax returns: Deadlines – GOV.UK (www.gov.uk)

Self-employed benefits

Depending on certain factors, you may be able to claim certain benefits. If you’re self-employed and not earning very much money, you may be eligible for income support or working tax credit, although the latter is being replaced by universal credit. Check the government website for more details. Help with moving from benefits to work: Starting or running your own business – GOV.UK (www.gov.uk) 

Self-employed Support & Universal Credit

Some help is available to self employed workers,  Full details can be found here: Self-employment and Universal Credit – GOV.UK (www.gov.uk)

This might include help with Housing costs and council tax, which might be reduced if you’re self-employed but you’re not earning very much money. When the council is calculating your eligibility for benefits like housing benefit, they will probably ask to see your business accounts for the last financial year, or a forecast if you haven’t started trading yet.

You may be eligible for Universal Credit if you’re self-employed. You will have to declare your earnings at the end of each monthly assessment period, and will have to give details of any payments into or out of your business. Your work coach will also ask to see records of customers and suppliers, and marketing materials.

Your Universal Credit payments may be calculated based on your assumed earnings, which are known as the Minimum Income Floor. However, a different method may be used if you are in your first 12 months of self-employment, during which the Minimum Income Floor may not apply. During this period you may also be entitled to meetings with a work coach who’s specifically trained in self-employment. 

Self-employed grants

You may be able to get a grant from the government if you’re going self-employed.  You may be eligible if you or your partner has been receiving jobseeker’s allowance or employment and support allowance, or if you’ve been receiving income support, or if you’re a lone parent, sick or disabled.

There are some other small business grants available too, from the government local councils, the EU, and some organisations.

Use the government’s finance finder tool to see if there’s a grant that could be suitable for you, or look  here: Help with moving from benefits to work: Starting or running your own business – GOV.UK (www.gov.uk) 

What to do next?

You should follow the link below: this will take you to the landing page that is the start of the registration process for becoming self-employed.

https://www.tax.service.gov.uk/government-gateway-registration-frontend?accountType=organisation&continue=/business-registration/introduction&origin=SA-frontend

If you require assistance managing your tax affairs we have details for a number of accountants that we can put you in touch with and would highly recommend using a professional.

Once you have decided?

Contact us again and we will tell you about any opportunities that match your skill sets, if you decide that you are happy to proceed, we’ll send you a contract confirming all of the details.  Below is a blank version for you to review.

—————————————————————————————————————————————————————————————————————

  ASSOCIATE CONSULTANCY AGREEMENT    

360 RECRUITMENT LIMITED 

-and-

Your name

Dated

THIS AGREEMENT is dated XYZ. 

BETWEEN

360 Recruitment Limited (Company Registration Number 07277291) whose registered Office is at 1st Floor, The Lookout, Bull Close Road, Nottingham, NG7 2UL (“the Company”);

and 

You  – “The Consultant”   

IT IS HEREBY AGREED as follows: 

1. DEFINITIONS 

1.1 In this Agreement the following words and expressions shall [unless the context otherwise requires] have the following meaning;

“The Services” 

Means all Services to be provided and/or undertaken from time to time by the Consultant or a competent person in substitution for or as an Assistant to The Consultant under this Agreement and as outlined in the Schedule A at the end of this document.  The Consultant shall provide the Services outlined in Schedule A. through the attendance at the Principal’s premises as agreed with the Company.

“Third Party”

Means anyone who is not an Officer, Agent or member of the Company

“The Client”

Means any Customer or Client of The Company or any third party that “the Consultant” provides their services to

“Confidential Information”

For the purposes of this Agreement, Confidential Information shall mean all the private, confidential and/or secret information concerning the Company’s business, business relationships or financial affairs details of which are not in the public domain or not generally known, such information being highly sensitive and highly confidential by reason of the damage that could be done to the Company’s business by any disclosure to or use by any third party of any such information including but without limitation to.

1. All inventions, trade secrets, products, processes, methods, techniques, formulae, know-how, concepts, compositions, compounds, projects, developments, plans, research data, technical data, trial results, software source code listings and all

2. Component sourcing and other technical information relating to the Company’s business and the development and exploitation of the Company’s products whether or not the same are protected as intellectual property through patents, copyright, rights in designs or the like; and

3. All other confidential information with regard to the business and financial affairs of the Company including financial and personnel data and that of the Company’s customers and suppliers, and including customer and supplier lists, business development, sales lead information, marketing information and pricing policies and structures, details of customer orders and requirements, any proposals relating to the acquisition or disposal of a company or part thereof or the expansion or contraction of any of the Company’s activities; and

4. Any other information, whether or not in writing marked Personal/Private/Proprietary data or any items specifically brought to the Consultant’s attention as constituting a trade secret or being of a confidential nature, even if not so marked and any other information of any kind directly or indirectly related to the business of the Company or to the business of any client or supplier of the Company or any third party which comes to the Consultant’s knowledge during the course of this agreement (whether or not in the proper performance of its services).

In the above definition references to the Company shall read as if references to any of its Group Companies were substituted. 

“Copyright Work”

All works and designs, including but not limited to computer software, text, graphics and databases originated conceived written or made by the Consultant alone or with others during the course of this Agreement with the Company (except only those works originated conceived written or made by the Consultant wholly outside normal social hours and which are totally unconnected with the Services provided under this Agreement).

1.2 References to Clauses are unless otherwise stated references to Clauses in this Agreement.

1.3 The headings to the Clauses do not affect their interpretation. 

2. PROVISION OF SERVICES 

2.1 The Consultant has agreed to provide the Services outlined in Schedule A, from time to time to the Company and the Consultant AGREES to provide such Services upon the Terms & Conditions hereinafter contained.

2.2 The Company is under no obligation to offer work to the Consultant and the Consultant is under no obligation to accept any work which may be offered by the Company. Neither party wishes to create or imply any mutuality of obligation between themselves either in the course of, or between, any performances of Service under the Specification.

2.3 It is the intention of The Company and the Consultant that this agreement forms a contract for services. 

3. DURATION 

3.1 The commencement & completion dates of this Assignment are listed in Schedule A of this Agreement.  

4. THE CONSULTANT’S DUTIES

4.1 During the period of this Agreement the Consultant shall:

4.1.1 Provide the Services referred to in Schedule A diligently and efficiently.

4.1.2 Co-operate with the Board of Directors of the Company and / or designated contacts within the Client.

4.2 Nothing in this Agreement implies that the relationship between the Company and the Consultant is that of Employer and Employee. The relationship between the parties remains that of Client and professional Expert.

5. MANNER OF PROVISION OF SERVICES

5.1 The manner in which the Services are provided shall be entirely in the Consultant’s discretion. No instructions or guidance shall be given by the Company as to the manner of performance of such Services PROVIDED ALWAYS THAT the Consultant shall be expected to meet any minimum quality controlled standards, or other such standards as may be set, laid down or specified and agreed upon as the deliverables for this contract for services.

5.2 The Consultant agrees to indemnify the Company for any loss, which it suffers because of any omission by any Assistant during the performance of duties, which would normally be carried out by the Consultant. The Consultant acknowledges that the Company shall be under no obligation to pay or indemnify any Assistant for any time spent by them or expenditure incurred by his/her/them in assisting them in the provision of the duties under this Agreement.

5.3 The Consultant shall not be obliged to carry out the Services personally; and may send along a competent substitute to carry out the Consultant’s duties (“a Substitute”). If the Consultant wishes to engage a Substitute then, prior to such engagement, the Consultant must inform the Company of the name and competency and/or qualifications of the Substitute and. the company in turn will liaise with the Client, The Substitute may only be engaged to carry out the Consultant’s duties under the Agreement where the Client consents; however, such consent will only be withheld in circumstances where there is a genuine reason or belief that The Substitute is not competent or qualified enough to provide the Services to the same level as the Consultant.

5.4 The Consultant agrees to indemnify the Company for any loss, which is suffered because of any act or omission by a Substitute during the performance of duties, which would normally be carried out by the Consultant. The Consultant acknowledges that the Company shall be under no obligation to pay or indemnify a Substitute for any time spent by them or expenditure incurred by them in carrying out duties which would normally be carried out by the Consultant. Notwithstanding the fact that the Company may permit a Substitute to carry out the duties under the Agreement the remaining provisions of this Agreement shall remain in force and the Consultant shall continue to be bound by them.

5.5 In exercise of its discretion the Company may provide such equipment as it deems appropriate to assist the Consultant in the provision of the Services; otherwise the Consultant is responsible for providing all its own equipment required in order to carry out the Services. The Consultant is required to insure its own equipment against all risks including loss, shock, fire, theft or destruction.  Any equipment provided by the Company will be stipulated in Schedule A.

5.6 Except where attendance at the Client’s premises is necessary for the purposes of carrying out the Services, the Consultant’s place of business shall be at its own offices and no office accommodation, secretarial or administrative facilities or support shall be provided by the Company.

6. FEES

6.1 In consideration of the Services rendered the Company shall pay the Consultant such sum or sums as agreed in writing between the Consultant and the Company, and set out in Schedule A attached, following the presentation of an invoice or invoices by the Consultant. Payment will only be made in respect of the hours/days worked by the Consultant and not for any periods during which the Consultant was unable to provide the Services due to sickness, holiday or any other reason.

6.2 The Consultant shall supply the Company with their full Company details, Unique Tax Reference number (UTR) or other such information as to ensure that we have proof of your genuine self-employment status, at their earliest convenience. Until such time the Company shall reserves the right to retain 30% of any monies due to be paid for the services.  Once the Company has received the details / UTR, all monies will be paid to the Consultant without further delay.

7. EXPENSES

7.1 The fee referred to in Clause 6 & the Invoicing Schedule shall include all expenses (including but not limited to travel and subsistence), necessarily incurred by the Consultant in the proper performance of the Services under this Agreement.

7.2 Where the Client has agreed to cover the cost of certain specific expenses incurred by the Consultant, and the Company has agreed to pass on such payments to the Consultant in addition to those referred to in Clause 6, if agreement has been reached in writing between the parties prior to the expense being incurred. Further details, where necessary, will be included in Schedule A, attached hereto.

7.3 Where the Company agrees to reimburse specific expenses, the Consultant must provide such receipts, vouchers or evidence of actual payment as the Company may reasonably request.

8. COPYRIGHT & CONFIDENTIALITY

8.1 COPYRIGHT

8.1.1 The Consultant shall promptly disclose to the Company or the Client all Copyright Work and shall hold it in trust for the Company or the Client until all rights in such Copyright Work shall be fully and absolutely vested in the Company or the Client.

8.1.2 The Company or the Client shall be entitled to make such additions deletions alterations or adaptations to or from any Copyright Work as it shall in its absolute discretion determine and

8.1.2.1 The Consultant hereby assigns to the Company or Client with full title guarantee (subject to the Company’s Client’s obligation to meet any expenses that may arise from any exercise by the Company of its rights under clause 8.1.2.3) by way of future assignment all copyright, database right, design right (whether registered or unregistered) and other proprietary rights (if any) that the Consultant may own in respect of all Copyright Work (“the Rights”) for the full terms thereof throughout the World in respect of all Copyright Work. The assignment shall include the right of the Company or the Client to sue for and obtain full and effective relief including damages in respect of every act of infringement of the Rights;

8.1.2.2 The Consultant hereby irrevocably and unconditionally waives in favour of the Company or the Client any and all moral rights conferred on the Consultant by Chapter IV of Part I of the Copyright Designs and Patents Act 1988 for any work in which the copyright or design right is vested in the Company or the Client whether by sub-clause 8.1.2.1 or otherwise; and

8.1.2.3 The Consultant shall, at the request and expense of the Company or the Client, do all things that the Company may reasonably request to give effect to the rights of the Company under this Clause 8.1

8.2 CONFIDENTIALITY

8.2.1 It is the Consultant’s inherent duty as a professional organisation to observe and abide by obligations of confidentiality and to adhere to the security requirements of the Company and those (where appropriate) of its customers. In the course of this Agreement the Consultant will have access to Confidential Information. Such information is highly sensitive and highly confidential due to the damage that could be done to the Company’s business by any disclosure to or use by any third party of any such information. The Consultant agrees that such Confidential Information is and shall be the exclusive property of the Company.

8.2.2 The Consultant including any Assistant and/or Substitute shall not either during this Agreement or at any time after its termination;

8.2.2.1 Disclose in any manner to any person or persons (except to those authorised by the Company to know);

8.2.2.2 Use for the Consultant’s own purposes or for any purposes other than those of the Company;

8.2.2.3 Through any failure to exercise all due care and diligence cause or permit any unauthorised transfer or disclosure to any third party of;…any Confidential Information

8.2.3 This restriction shall cease to apply to any information or knowledge which may (otherwise than through the Consultant’s default) become available to the public generally.

8.2.4 All notes, memoranda, computer and other records and writing made by the Consultant relating to the business of the Company or any of its Group Companies shall be held confidential and delivered by the Consultant to the Company forthwith upon request.

8.2.5 Any breach of the Consultant’s obligations under these Clauses during the course of this Agreement may be treated as sufficient cause to justify the Company terminating this Agreement in accordance with Clause 13.2.1. This is in addition to any liability to pay damages to the Company which a breach of this clause at any time may give rising. 

9. NO RESTRICTIONS ON THE CONSULTANT TO PROVIDE SERVICES TO OTHERS 

9.1 The Company and the Consultant acknowledge that nothing in this Agreement shall be taken to restrict the Consultant from providing any similar Services to any other person, firm or company or from being retained or otherwise engaged, on its own behalf of or on behalf of any other person firm or company, by any other person firm or company 

10. RESTRICTION

10.1 The Consultant shall not for a period of six months following the termination of the Assignment supply its services directly, or through any other person, firm or company, to any Client for whom it has carried out the Assignment at any time during the previous six months.

11. TAXATION

11.1 The Consultant shall be responsible for Tax, National Insurance or similar deductions in connection with any monies or expenses paid to the Consultant or on the Consultant’s behalf by the Company, or in respect of any Tax or National Insurance liabilities incurred by any Assistant or Substitute in connection with their performance of any of the Consultant’s duties under this Agreement.

12. HOURS

12.1 The Consultant is responsible for arranging with the Client when to provide Services, or to agree the Deadlines in which the Task(s) must be completed.  Details of what is agreed upon will be included in Schedule A, attached hereto

13. LIABILITIES AND INDEMNITY 

13.1 IT IS HEREBY ACKNOWLEDGED AND DECLARED that it is always the intention of the parties that the Company shall engage the Consultant upon the basis that the Consultancy shall have the status of an independent contractor, who does not provide Services exclusively to the Company.

13.2 The Consultant hereby agrees to indemnify the Company against all costs, claims, actions, demands, penalties and liabilities incurred in respect of or arising in connection with any tax, National Insurance or similar impost or other such payment of a fiscal nature which may be found due from the Company in respect of the engagement and the payment of fees by the Company to the Consultant there under

13.3 If the Consultant has been offered but shall unreasonably have refused to agree to the transfer of this Agreement by way of novation to a company which has acquired or agreed to acquire the whole or substantially the whole of the undertaking and assets of or of the equity share capital of the Company, the Consultant shall have no claim against the Company in respect of the termination of the Appointment by reason of the subsequent voluntary winding up of the Company or of the disclaimer of this Agreement by the Company within one month after such acquisition.

14. TERMINATION 

14.1 The Company may by notice in writing terminate this Agreement forthwith if the Consultant:

14.1.1 Is in breach of any of the terms of this Agreement which in the case of a breach capable of remedy, shall not have been remedied by the Consultant within 14 days of receipt by the Consultant of written notice from the Company specifying the breach and requiring its remedy;

14.1.2 Is guilty of conduct which is likely to prejudice the reputation of the Company;

14.1.3 Fails or refuses to carry out the duties reasonably and properly required of it hereunder;

14.1.4 Is unable to fulfil the duties hereunder for a period exceeding 14 days; or

14.1.5. The Consultant becomes subject to insolvency proceedings.

14.2 Upon the termination of this Agreement for whatever reason the Consultant shall forthwith deliver up to the Company all correspondence documents and other papers and all other property belonging to the Company or its workers which may be in the Consultant’s or any Assistant’s or Substitute’s possession or control and the Consultant shall not without the written consent of the Company retain any copies thereof.

15. GENERAL

15.1 The Consultant has committed to a fixed term and as such, no notice period shall be applicable.

15.2 The clause or paragraph headings shall not affect the construction of this Agreement.

15.3 This Agreement shall be governed by and construed under English Law and each of the parties hereto submits to the exclusive jurisdiction of the English Courts as regards any claim or matter arising under this Agreement.  

SIGNED for and on behalf of the COMPANY:   

SIGNED for and on behalf of the CONSULTANT:    

SCHEDULE A

1. CONSULTANCY DETAILS

1. Services: Your skills or profession

2. Location(s): Where you are able to provide services

3. Commencement Date: as agreed

4. End Date: as agreed

5. Notice Period see paragraph 15.1

N.B Re the Provision of Services; you are entitled to provide a competent substitute / replacement to carry out the services. During this agreement you are entitled to work elsewhere, and provide your services to others, insofar as the commitments that you have agreed to herein are met. Ar the completion of this agreement (the end date) there is NO EXPECTATION or commitment from either party to provide further / continued work, or for you to continue to provide services. 

2. INVOICING DETAILS

2.1 Consultancy Rate:           £ to be confirmed!

2.2 The Company operates a weekly invoicing schedule, with 14 days’ payment terms.  On any given invoicing week, where the company receives an accurate invoice with appropriately authorized supporting documentation (see below) on the MONDAY of each invoicing week, the Company will transfer such payment via BACS to the Consultant in respect of that invoice within 14 days.

2.3 All invoices must be supported by:

a) Signed timesheet setting out a breakdown of the number of hours/days when Services are rendered, &

b) A breakdown of the Services provided by the Consultant. 

c) A signed Expense claim form accompanied by all relevant / supporting receipts.

2.4 The Company has no right to withhold payment to the Consultant until the Principal has paid the Company for the services in question.

2.5 In order for the Consultant to carry out the Services it may be necessary for him to have use of the equipment, but only as agreed with the Principal.  It will be necessary for the Consultant to pay the costs of providing this equipment.  However, in exceptional circumstances the Company may exercise its discretion to reimburse these costs.  In order to claim reimbursement; the Consultant must submit an appropriate invoice, together with such receipts as the Company may demand.