Being self employed brings with it so many benefits – the ability to manage your own work schedule, meet new people and learn new skills.
However, before you make the jump here are 5 questions to ask yourself to make sure you are fully prepared to quit your job and move into the world of self employment and running your own business:
1. Where is your first client going to come from?
Being in a regular job means you receive a salary at the end of each month. However when you move to be being self employed it is down to you to find your own clients, deliver the agreed work and then get paid, possibly on completion of work. Have you found your first client or what is your plan to find your first client once you quit your job and how long will it take to find them? Once you have found your first client, is the money sufficient for your living costs and what is your plan to find more work?
2. How much money do you need to live?
We suggest working out how much money you need to live each month (mortgage, bills, food etc). Start by listing out all your costs on a simple spreadsheet, maybe add a little contingency in case there are some unexpected costs. Bills such as rent, car payments or telephone bills will need to be paid each month on a fixed day, so make sure you have sufficient cash reserves to cover these until you receive your first client payment or regular payments.
3. Do you have all the equipment you need?
Make sure you are properly set up with everything you need to deliver your new work such as a computer or insurance. Your clients will expect you to hit the ground running, so make sure you are fully set up with everything you need to avoid disappointment! Client recommendations is one of the best ways to win new business, so always provide the best service you can.
4. Have you let HMRC know about your change in circumstances?
HMRC need to know that they way you earn your money has changed and so has the way you need to pay your taxes. Rather than having your tax and national insurance deducted from your payslip each month, you will need to notify HMRC of your annual earnings by submitting a personal tax return and pay any tax due in January and July of each year. Consider how you will manage your taxes and keep accounting records, an accountant would be able to guide you through this process but make sure you budget for their costs.
5. Have you considered your pension?
You maybe receiving pension contributions from your current employed. Once you leave employment you need to consider how you will reach a stage where you can save money into a personal pension and who you use as a pension provider. Also, if you are planning to take a break from contributing to your pension while you get your business up and running, how will this impact your retirement plan?