Is it Easy to Become A Freelancer
Becoming your own boss can be both exciting and scary, particularly during such uncertain times.
When becoming a freelancer, it is important to know whether you intend to become a sole trader or to set up as a limited company. Let’s take a look at them both in greater detail to help you decide which you are:
In the UK, 60% of small businesses are set up as sole traders. This is because it is a far easier and more straightforward way of getting your foot in the door to the business world compared with setting up a limited company and is also much more affordable, making it particularly appealing to those looking to start a business for first time.
Unfortunately, the downside of being a sole trader is the responsibility they hold for all liabilities of your company. This means if something were to go wrong, you could potentially lose large amounts of money and your belongings, including your home.
A limited company is considered to be its own entity. As a director of the company, you would be classed as an employee. Although this means you will have to handle two sets of tax issues (personal and business tax), the upside is that as an employee you aren’t held responsible for any of the company’s debt and your personal property will not be at risk in the event of something going wrong. However, it’s important that freelancers operating through a limited company need to be aware of IR35 legislation.
Managing you Taxes – this potentially involves:-
-PAYE for employees
-VAT only if you trade above threshold or would benefit from voluntary registration.
-Corporate taxation for limited companies
-Making Tax Digital
-what expenses are allowable
-what reliefs are available
It is important to ensure you run your business in the most tax efficient manner possible. It is often false economy to ignore these issues, as a firm offering accounting service for over 30 years we can help with all these matters.
We are very friendly and approachable and are here to help.