Tax
Tax for self-employed people is mostly simple and straightforward, which is one of the reasons that many people go for this option. Dealing with tax becomes a bit more complicated and expensive if you set up a limited company.
Tax is managed by the Inland Revenue - the UK government’s tax department. If you are self-employed, the process of telling the government what you earned, what you spent in your professional activities and what tax you owe is automated. You will need to complete and submit a tax return, which is easy to do online. The Inland Revenue provides plenty of online guidance and assistance.
Alternatively, you can pay an accountant to file your tax return for you. It’s a good idea to choose a smaller firm or individual that knows how creative businesses work and is more affordable. Starting out, you should expect to pay around a couple of hundred pounds a year.
The key is to keep good records - month by month, not at the end of the year:
- Keep a record of invoices you issue, how much they are for and when you receive the money.
- Document everything you buy or pay related to your business activities. That includes everything from bus fares to laptops, printers to pattern cutters.
- Set up a simple spreadsheet and add items to it regularly rather than waiting until year-end when your tax return is due.
Insurance
Insure any expensive equipment you use for work, like cameras or musical instruments.
It’s also a good idea to have public liability insurance (search for quotes on comparison sites such as Money Supermarket and Compare the market), which insures you for claims made against you by a client or member of the public who believes they’ve been injured, or their property damaged, by your business activities. Some organisations will only do business with you, or rent space to you, if you have public liability insurance.
There are other kinds of business insurance like employer’s liability insurance, which you must have if you employ other people. What type you need is dependent on the type of business you are in.