Self employed
Becoming a sole trader is perhaps the simplest way to get started. You don’t need to set up a company, you simply register as self employed with HMRC. You will need to complete a self assessment tax return but, as with running a limited company, a good accountant specialising in accounting for contractors will be able to handle all the nitty gritty for you.
There are two main issues that put contractors off however; firstly, you’ll have to find all your contracts yourself, rather than going through an agency, because of the employment risk involved. Secondly, being self employed doesn’t always enable you to maximise your take home pay, and you’ll have to pay tax on all of your income, as opposed to a limited company, where you can possibly limit the income taxed personally at higher rates.
Good choice if:
- You work for a number of different clients simultaneously
- You want to reduce your legal responsibilties
- You want to be your own boss
- You want to set up quickly, easily and cheaply
Not so good if:
- You want to maximise your tax efficiency and your take home pay
- You don’t want the responsibility of finding all your contracts by yourself
- You have longer contracts that last a minimum of a few days
Further information:
http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.htm
