Self-Employed, Not Alone

Self-Employed, Not Alone

Whether you're a sole trader or a limited or public company, if you are self-employed you need to be an on the ball person. Juggling jobs and organising your own finances and tax payments can be more stressful and time consuming than you imagine, and it certainly isn't for everyone.

Below are some UK based guidelines to give you an idea of what's required if you want to set up your own business. But tax is a complex area, so you should always seek professional advice before you begin trading.

Running a business

As a self-employed person, you will receive gross earnings from your customers on which you pay tax through a self-assessment tax return. You must complete your tax return each year, doing so as promptly as possible so that you can begin to plan for your tax payments. It is essential that you keep proper records of all your business income and expenses, including copies of invoices to customers and receipts for purchases (especially if you are VAT registered). A bookkeeping software package is good for this, but a simple ledger will be fine. And although not essential, it might be an idea to hold a separate business bank account to keep your business affairs apart from your personal finances.

Inland Revenue, Customs and Excise and VAT

You must tell the Inland Revenue (IR) that you are trading within three months of starting the business or else you will be liable for a penalty. If your turnover exceeds £83,000 in any 12-month period, you must register for VAT, informing Customs and Excise within 30 days of your turnover reaching this level. You can also register for VAT if you have a smaller turnover, and this allows you to reclaim the VAT element of all of your costs. Unlike income tax, VAT relates to single transactions so the VAT invoice or receipt must be kept for every transaction related to the business.

National Insurance

You pay National Insurance contributions to qualify for certain benefits including the State Pension.

You pay National Insurance if you're 16 or over and either:

- an employee earning above £157 a week

- self-employed and making a profit of £6,025 or more a year

You need a National Insurance number before you can start paying National Insurance contributions.

If you earn between £113 and £157 a week, your contributions are treated as having been paid to protect your National Insurance record.

Limited company

Trading as a limited company gives you a measure of protection against commercial creditors. As a sole trader or partner, you are fully liable for any business debts and may be made bankrupt if the business fails. If you are a limited company, however, you are usually only liable for debts to the extent of your share capital in the company, except in cases of fraudulent trading.

Pay your Self Assessment tax bill

The deadlines for paying your tax bill are:

- 31 January - for any tax you owe for the previous tax year (known as a balancing payment) and your first payment on account

- 31 July for your second payment on account

If you prefer to pay regularly throughout the year, you can use a budget payment plan.

You can get help if you can't pay your tax bill on time.

Ways to pay. Make sure you pay HM Revenue and Customs (HMRC) by the deadline. You'll be charged interest and may have to pay a penalty if your payment is late. The time you need to allow depends on how you pay.

Tax investigation

The self-assessment tax procedure is accompanied by random tax audits to monitor the system. The Inland Revenue can investigate your business affairs at any time and without reason. In fact, it conducts 750,000 investigations each year, about 8.5% of all tax returns, which means that anyone may find himself being investigated without knowing why or what the IR is looking for.

If handled correctly, an investigation may not be so daunting. Remember three important tips:

Keep accurate records. Records are the evidential backbone of your business. The more accurate and detailed they are the stronger your case.

Deal with enquiries promptly and efficiently. From your first response to an inspector's query, he will be building up a picture not only of your business but how responsibly you take your tax affairs.

Negotiation. An inspector has the power to negotiate on penalties and will take into account factors such as how you help with the enquiry and what course of action you offer to put matters right.

Employment status

Although there are no definitive rules as to a person's employment status in the UK, the distinction is usually whether you are working under a contract of service (employment) or a contract for services (self-employment). The IR will usually look at the following factors.

You are employed if:

You yourself do the work rather than hire someone else to do it for you

Someone can tell you at any time what to do or when and how to do it

You work at the premises of the person you work for or at a place he/she decides

You are paid by the hour, week or month and often for overtime

You work set hours or a given number of hours a week or month

You are self-employed if:

You have the final say in how the business is run

You risk your own money in the business

You are responsible for meeting the losses as well as taking the profits

You provide the main items of equipment you need to do your job, not just the small tools many employees provide for themselves

You are free to hire other people on your own terms to do the work you have taken on and you pay them out of your own pocket

You have to correct unsatisfactory work in your own time and at your own expense

Occasional earnings

Do not confuse occasional income with seasonal income, which is always classed as self-employment. Occasional or intermittent earnings may not be classed as self-employment, but each case will be taken on its own merits. Occasional earnings must be disclosed on a self-assessment tax return and tax paid at the normal time.

Find out more

The people who deal with your tax payments are not the enemy you might think they are. In fact, of all the customer service personnel you will ever deal with, they rank among the friendliest and most efficient.

- For Inland Revenue, visit

https://www.gov.uk/government/organisations/hm-revenue-customs

- For Customs and Excise, visit

https://www.gov.uk/government/organisations/hm-revenue-customs

- For details about Record keeping and simpler Income Tax applications/software, go to

https://www.gov.uk/government/collections/record-keeping-and-simpler-income-tax-applicationssoftware

- For information about employment status, go to

https://www.gov.uk/guidance/check-employment-status-for-tax

Meet Your Future Partners

Meet Your Future Partners

Your fabulous new embossed business cards have arrived. You've groomed your personal profile online. And you've just gone broadband bananas so you can be sure not to miss out when you're busy online and all those telephone calls, begging for your services, come flooding in.

Brilliant. Time to sit back and wait. Right? Wrong. However great you are at whatever it is that you do, business won't gravitate towards you by the sheer forces of nature. You have to go out and get it.

The offline net

As an independent consultant, or freelancer of any sort, there is always more you can be doing towards ensuring the flow of future work.

Networking is one crucial and ongoing activity that every self-employed person must do to find business, bring it in and keep it coming. And one cornerstone of networking is the referral meeting.

A referral meeting can be any kind of contact with someone in a position to refer business to you. Whether it's a formal office appointment or a brief chat at a social do, the aim is the same. To let other people know what you have to offer, while learning from them about contacts and connections that could help your business to grow.

Network means legwork

Rather than meeting with people who can hire you directly, referral meetings tend to be with those who have leads to the people or organisations that might hire you.

This can be more time efficient than your trying to pursue individual potential clients, as referral sources can spread the word about you to more potential clients than you could get to meet by yourself. It expands your business effort without the effort. Also, they will hopefully know the right people to target with their referral. (Something you can't always gage before you've wasted time and energy traipsing across town, or towns, to meet someone who turns out to be a non-potential client after all.) It's like having a sales rep promoting you while you concentrate on the creative side of business.

Saying that, referral meetings can still be a toil. The success rate they produce is often a mere fraction of the legwork you have to do to achieve it. Several dozen meetings might yield just one or two potential jobs. And even then, it could be a long time before those briefs actually come in.

Everyone knows that freelance is famine or feast. What's important is that you use your famine times to get out there meeting potential referral sources and working to bring the next feast to your table.

Relate yourself

Before any referral meeting, you of course have to prepare. If you don't know the person well, you must get to know them through a little research. Consider their line of work so you can talk about your own business in a way that is meaningful to them. Bear in mind their level of knowledge in your area. Don't use jargon that they won't understand and don't over explain something that they will.

The sales pitch

You are in this meeting to promote yourself, so be articulate about what you have to offer. Focus on selling the benefits of your service, not the features. Instead of describing what you do and the skills and tools you use to do it, talk about the end results of your work: how your service can improve people's businesses, increase their profits and encourage repeat custom. There's time later to get into the details of how you operate.

Present yourself in stereo

Good presentations combine both words and props. And people will want to see evidence that you can actually deliver. So take to the meeting something visual to back up what you say. A portfolio is a must, whether it's a hard copy or online. Brochures and flyers also convey a professional image, although you don't want to overwhelm someone with reams of paper. Equally, involved laptop presentations are a bit much for a one-to-one meeting. Simply take along enough to present yourself as a polished package.

It's an idea to follow up the meeting by sending any additional material that you didn't give in person. Not only does it add to an otherwise brief thank you note or email but it makes a good indication that you intend to deliver (to future clients) everything you spoke about.

If your work doesn't involve any tangible product that you can take to a referral meeting, then you'll have to rely on description. Talk about previous projects you've worked on, real stories of accomplishments. Written case studies or client testimonials would be your best bet in this case.

Make it work both ways

Much as you are a creative rather than salesy person, this is still a mild game of PR you're playing here, and there are certain rules you should follow if you want to stay in it. We're not talking blatant schmoozing. Rather a simple case of running a two-way street.

Cultivating a relationship with your new ‘friend' demands a genuine effort to stay in touch. True networking is give and take, so don't even think about developing a professional rapport unless you're willing to give as much as you get.

It's a partnership

Every so often, remind them who you are and what you offer, remembering to find out how you can be of assistance to them. Tell your referral source about a feature that might be of use or of personal interest to them, be it a book or article you've read, a website you think is relevant or an event they might want to attend. Send them updates on your services and successes, an email newsletter or a pointer to developments on your website.

Where appropriate, you might even give a professional courtesy discount, offering your products or services at a reduced rate to the people who are particularly supportive of your business. And always show your appreciation for any referrals they do send your way, especially if they result in business for you. Send a small gift or take your referral source out for lunch or drinks.

Okay, so this last one is slight schmoozing. But we're all only human.

Putting Up Prices Not Fences

Putting Up Prices Not Fences

Money is one of the reasons why people freelance. When the work is there, the rates can be excellent. So money is going to be a prime concern when it comes to renewing contracts with clients.

New terms time

It's always slightly awkward to renegotiate a contract with an existing client. It's particularly difficult when this is your biggest and oldest client. The client that's so lasting, in fact, that the rates you've been charging him all this time are now well out of date. You'd never dream of charging so little to new clients these days. But how do you tell him that you're raising your fee by what might seem to him a huge and perhaps cheeky leap?

Business is business

You don't want to offend or alienate your most loyal source of business. Your personal relationship with him is important and it's largely this rapport that's kept the partnership going so long. But, while good personal relations are a valuable element of any consulting arrangement, the health and prosperity of your business must be your bottom line.

If you're the kind of person who's afraid to even barter at a rip-off tourist flea market while holidaying where haggling is quite the custom, you might have some trouble asking a long time supplier of work for more of his cash.

So how to renew a contract without squirming in your skin or burning bridges you can't afford to char?

For starters, you don't simply ask for more money without good reason. You need to give a rationale for increasing your fee.

You're underrated

Higher expenses and overheads are perfectly good grounds. You could be renting extra office space, hiring new personnel or undergoing the latest training course in order to develop your own professional skills, all of which directly or indirectly help to improve the service you are offering your client.

Rather than simply increase your daily or per project rate, however, you could restructure your charges. This might mean asking for mileage reimbursement, if a client requires you to travel to his office, or charging for time spent at client meetings, if you didn't do so before.

Intellectually speaking

Aside from increasing your price for actual hours devoted to a client or project, you can sometimes renegotiate your intellectual capital rights. Quite often, freelancers, either knowingly or unknowingly, sign an agreement to give away all rights to the intellectual assets they create. Looking back, this might be imprudent, but it's by no means irreversible. Consider renegotiating the intellectual property terms of your agreement.

Whether it's a clever software code, a slick art design or a brilliant copy line, you might produce work for a client that you recognise to have commercial value beyond the company's specific needs. It's worth asking the client to deed that intellectual property back to you, especially if it's something he will never use in the future. Satisfied with the results of the project at hand, he may not want to go to the trouble of realising the additional value you have created.

You may also think about asking for royalties on uses of future works created while you're under contract.

Intellectual rights are a complex issue so, if you're unsure about the ins and outs, consult a lawyer before approaching your client.

Speak up

At the end of the day, when it comes to wanting more money, you've simply got to ask. You never know, your client might be anticipating your broaching the subject, bemused that he's still enjoying your services for what he knows are sub-market rates and wondering why it's taken you so long to get around to the question.

The Price Of Freedom

The Price Of Freedom

Freelance is a trade off: autonomy, satisfaction, variety and freedom in return for an equally compelling list of downsides. Immense insecurity and little opportunity to switch off from work are just two of the problems faced by freelance workers in all walks of industry.

Famines and feasts

Money worries. Financial risk and instability are part and parcel of working for yourself. But choosing to freelance is a calculated decision so you will have worked out that your contract rates of pay will normally make up for periods when business is slow.

But what if you're busy working and simply not getting paid? This is a problem that you should learn to prevent rather than solve. When you first begin or agree to a new contract, ask straight up about the company's pay procedures. Who signs off contracts? Should you complete timesheets? What expenses, if any, are reimbursed? When will you receive your cheque? If you're still sceptical about getting paid, it's worth asking for half of your fee up front. You'll be surprised how many clients are willing to oblige.

Chasing up payment for a project you've already done is frustrating. You can't turn to the person who brought you in on the project. It won't be their job to worry about finances and you don't want to appear such a pest that they won't relish the hassle of hiring you again.

Instead, you must make direct contact with the company's accounts payable team. Talk to them early and often. Long before you'd expect to see your cheque in the post, call them up to find out their standard payment terms for contractors. If it's 60 or 90 days, you might be able to change this to 30 or 45 days by simply having spoken to the right person at the end of the phone. Don't wait for a problem to arise. And if you do have a problem, don't be shy about saying so. Accounts people are used to being pursued by suppliers and contractors. You've fulfilled your service to their company and you're entitled to their attention. So do what you can to get it.

Highs and lows

An infuriating client . The work is fine. It's the person you work for that's driving you crazy. This is a personality clash like orange and pink.

Remember who's boss and learn to say no. Part of your decision to go freelance will have included less stress and the choice to work with who you like. But how do you spot a potentially troublesome client before a project's begun? Some of the telltale signs are a client who negotiates overly hard on your fee, demands an extensive written proposal or asks you to do a lot of preliminary work for no charge. If you sense any niggling doubt, go with it. If you're already committed to the contract from hell, finish the job, do it well, and then fire your client.

Ups and downs

No time to market yourself. When you're busy juggling jobs for and meetings with a number of clients, there's often no time to do that essential freelance task of marketing yourself to potential new ones.

If this is your problem, it needn't be. You're probably thinking about marketing as if you still worked for a large corporation. Break out of the old mindset. Promoting yourself as a freelancer is not about responding to newspaper ads or dropping flyers through people's doors. But it's about almost everything else, including the quality of your work, the reliability you demonstrate, the look of your website, the articles you write, the networks you join, the conferences you attend and the conversations you have with the people sitting next to you.

Peaks and troughs

All work and no play. Even if you do find time to update your website or revamp your business cards, freelance life can make Jack a very dull boy. If you are your own business then there's a natural reluctance to close the business for even one second of the day for fear of missing an opportunity. Time to fix some boundaries. Set a daily quitting time, designate an hour for the gym and arrange a date to play squash. Schedule days off, and not necessarily at the weekends. You dictate your own timetable so treat yourself to a weekday away from your computer. The shops will be less crowded and you can enjoy a stroll in a relatively empty park. And the joy of being off work in the middle of the week, while everyone else is at their desks, will give you an added sense of appreciation and empowerment.

Swings and roundabouts

Feeling lonely. Having longed to escape all those corporate annoyances like time wasting meetings, political promotions, back stabbing gossip and obligatory socials, there are moments when every freelancer feels out on a limb. And if you do most of your work from home, you can go quite stir crazy.

Even the most hardened of loners crave personal interaction. But as a freelance worker, other people won't come to you – you have to go to them. So call an old colleague. Call a new one too. Then call a friend who has nothing whatever to do with your work. Read magazines outside of your field. Surf websites on new topics of interest. Check out the latest film releases.

In short, stimulate yourself by whatever means are needed to keep your intellectual curiosity on its toes, while achieving a healthy balance between your professional life and the personal and social lives that keep you sane. It's important to love what you do, but remember to work to live and not live to work.