Going self-employed? Here is how to get to grips with your finances

Do you have a brilliant business idea that you want to turn from a passion project into your career?

There are now five million self-employed people in the UK, turning their talents into a living, but being your own boss comes with plenty of financial considerations that must be made.

The pitfalls of irregular income

While the flexibility and independence that comes with being self-employed are among the chief benefits reported by those who do step out on their own, those same factors can also contribute to additional stress.

Is your chosen field reliant on seasonal trade? Might your product be open to fluctuating sales and interest?

If so, you will have to pay for your income to fluctuate along with that, with overheads potentially outweighing revenues at the leanest times.

Getting to grips with your income calendar as quickly as possible will help you learn how much needs to put aside when business is booming on order to make up the shortfall.

Financing purchases

If your business is well-established and bringing home the bacon, you might want to use that income to purchase a holiday, new car or even a house.

Getting credit lines in order to buy things on finance can often be a bit trickier if you are self-employed though as your income is not fixed like a contracted employee.

Most mortgage lenders will offer products for self-employed people, although there may be a few more hoops to jump through.

When it comes to new cars, companies like Go Car Credit specialise in securing finance for the self-employed, making it easier for you to pick up your dream set of wheels if traditional lenders throw up a roadblock.

Dealing with taxes

While employees will have their taxes deducted from their wage packets, you will have to calculate and pay your own taxes.

Much like balancing your income, making sure that money is left over to pay HMRC is vital and falling behind on your obligations could have ramifications for your business and personal life.

If you do need any assistance with your self-assessment, the government has a vast store of online resources to help get your head around it all.

Planning time off

We all need a break from the daily grind from time to time. But doing so when self-employed could lead to a loss of income, particularly if you do not employ people who could oversee things while you’re stretching out on the sun lounger.

Communication with clients here is key. Can you drum up some business to commence as soon as you get back from your jollies? Doing so will allow to relax, knowing that your cash flow will reopen when you land back on home shores.

TwitCount Button