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5 steps to set up as Self Employed

A lot of people don’t realise but even if you have a full time job and decide to earn some extra income through selling products online, or door to door for example health and beauty products, bakeware, etc, you really should register that part of your income as self employed and complete an annual self assessment.

The same applies if you set up to do this type of work which is Direct Marketing as your only source of income.

Below are some steps to consider and follow to make your life simple.  Always make sure you keep records of everything you have purchased to earn this income, everything you have spent and every mile you have travelled whether in a car, on a motorbike or even a push bike!  All of these will be included in your annual self assessment.

1) Decide the name, and nature of your new business:

Before you set up as self employed, you must be clear of the nature of your business, and if there is a market for it. Furthermore, you will need to decide on a business name, and apply for any permits that may be required. Taxi Drivers, Childminders and Street Traders must all apply for permits. 

When deciding on a name for your business, you must bear in mind that you cannot use sensitive expressions, terms such as LTD or PLC, suggest a government connection, or use a name that is similar to a registered trademark or other business within the same sector.

2) Register with HMRC

When you set up as self employed, you must register with HMRC within 3 months of working or starting to trade. To register with HMRC, click here to go to the HMRC website. To set up as self employed with HMRC you will need to provide your:

Once you are registered as self employed, you are able to apply for Small Earnings Exemption (SEE) from Class 2 National Insurance contributions. To do so, use the CF10 form from HMRC found here.

3) Register for Self Assessment

Once you have set up as self employed, you will need to register for Self Assessment, and complete your own self  assessment tax return each year, either on paper by 31st October, or online by 31st January. This is where you inform HMRC of any income and capital gains, and in which you may claim any tax allowances or reliefs. We are able to complete your Self Assessment return for you. More information can be found on our Self Assessment page.

In April each year, you will be sent a tax return form by HMRC. Once your self assessment is completed, any money you owe for tax, must be paid to HMRC by 31st January.

4) Planning Your Business

Writing a business plan is a fundamental part of setting up a new business. It will help you to research and develop your business idea, and to give a clearer idea of what you will need to set up as self employed. A well written business plan can also be used to attract potential investors to your business. With the technology that is available today, business plans are often presented in a digital format, rather than on paper. However, if you choose to do this, ensure you present no more slides than you would pages in a written plan.

Business plans should be strategic, setting a starting point, and a point you wish to get to, usually 3 to 5 years in the future. Your plan should be between 20 to 30 pages of text, with approximately 10 pages of appendices for cash flow projections, resumes and so on. Any text should be written in efficient prose, and should avoid jargon and acronyms. Always use a readable font, that isn’t too small, and use no more than 2 different fonts throughout your plan.

When you set up as self employed, writing your business plan at the start, before you begin to set up your business, will help to give you a clear idea on what you will need in order to start trading. Avoid producing pages and pages of financials that are based only on guess work. It’s the action behind the pages of a business plan that investors want to see.

5) Determine Your Set Up Costs

Once your business plan is written and finalised, you will be able to determine the finances you will need to start up your business. Ensure that included in these are costs for marketing, equipment, rent if you are renting a premises,