The second installment in our two-part feature, this time focusing on the legal (and slightly dull-but-necessary) steps you need to take to set yourself up as your own boss!
Last year we explored the pros and cons of becoming self-employed in order to launch your career as an artist. This month we’re looking at the practical steps you need to take in order to get going and ensure you’re abiding by the law and doing everything correctly! It can seem daunting to take the leap into working for yourself, especially if you’ve only ever worked for somebody else till now. But the benefits, as we explored in November’s newsletter, can be enormous. So, assuming that you’ve weighed up the plus points and have decided to go for it, you’re bound to have a rather large pile of questions. Such as….
What are the key things I have to do?
This list is things you MUST do in order to become your own boss!
* Register as self-employed
* Pay National Insurance contributions on a weekly basis (see National Insurance section below for exceptions)
* Register for VAT if you expect to turn over more than £68,000 per annum….hey, why not aim high?!
This list is not essential but advisable in order to make life a whole lot easier!
* Set up a business bank account. Keeping your business and personal money separate really makes life easier when it comes to doing your accounts and submitting your tax return. Even if you’re not earning much to start with, it really helps and also makes you appear more professional
* Decide whether you need or want to use an accountant. Many prefer to save the money and do their accounts themselves, but you have to keep on top of things! Having an accountant saves you a lot of work but I used to use one and discovered that if I just got into the routine of keeping my accounts every month, I was able to use my own figures in my tax-return and saved myself a considerable amount of money every month. However this is not ideal for everyone, so start to source out accountants if you want to use one. Word of mouth is the best way of finding a good-‘un. Ask your self-employed friends for their contacts and recommendations. Or look in your local area…go and see a few before you decide.
* Regardless of whether you’re using an accountant or doing the books yourself, you need to be organised when it comes to keeping your accounts. Start a spreadsheet/ledger to log your accounts at the end of every month. All you need to do is log your income, your business outgoings and keep the receipts for materials you use in your work that you may be able to claim back in business expenses. By doing this on the last day of each month you’ll get into the routine and it’ll become second-nature. It also really, really, really helps when Tax Return Time comes around and you’ve got all your accounts and receipts in order to hand to your accountant or sort through yourself! (Trust me on this one – been there, done that!!)
* Keep track of where everything is going! (Again, trust me on this one). Sold a picture? Great…make sure you have a record of the exact date you sold it, who to and retain their contact details! Just keeping a record of amounts is not enough. You also need records of contacts and buyers.
So….you’re ready to register and so on….here’s some (hopefully useful) info for you! All links and helpline numbers/downloadable form links will be given in a list at the end of the article for easy retrieval.
Where do I start??
There are many sites online which have advice about starting up your work, as well as many blogs about working as an artist. However, in my opinion (for what it’s worth!), the best place to start to check you’re doing it all correctly is the HM Revenue & Customs website (www.hmrc.gov.uk/selfemployed/). This is a comprehensive site and has ‘Business Link’ sections which cover all aspects of starting up and running your own business
(http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073858805).
How do I register?
When you become self-employed you must register for Income Tax and National Insurance purposes with HM Revenue & Customs (HMRC). You can register online, by telephone or by post. You need to register AS SOON AS POSSIBLE to avoid a penalty (payable if you fail to register within three months of starting up). It’s best to look into this whilst you’re THINKING about going it alone in order to avoid missing deadlines! You need to have the following
information to hand in order to register:
* Your personal details (name, address, telephone number, contact email address, date of birth and so on)
* National Insurance No. (you can find this on your National Insurance card, letters from Social Security, documents sent to you from HMRC, on your pay slips, P45s or P60s. If you’re still unsure, call HMRC on their National Insurance Registrations Helpline: 0845 915 7006 (lines open 8.00 am to 5.00 pm Monday to Friday)
* The date you started working for yourself
* Business telephone number and address if it differs from your home details
* The nature of your business
* Your Unique Taxpayer Reference no. (you can find this on correspondence from HMRC, your tax return notification – or call the Newly Self-Employed Helpline (0845 915 4515) for help.
Now you’ve got all that ready, you’re ready to register!
For online registering, follow this link:
https://online.hmrc.gov.uk/shortforms/form/CWF1ST?dept-name=CWF1&sub-dept-name=&location=40&origin=http://www.hmrc.gov.uk
To register by phone, call this number:
0845 915 4515 (Newly Self-Employed Helpline) – open from 8am to 8pm Mon-Fri & 8am to 4pm Sat & Sun.
To register by post, you need to complete form CWF1: either call the Newly Self-Employed Helpline no. above and ask them to send you one, or you can download one from this link:
http://www.hmrc.gov.uk/forms/cwf1.pdf. The address to send to is on the form.
Ta-daaaa! You’re now registered as self-employed! Hurrah! Now you need to arrange to pay your Class 2 National Insurance contributions!
What is National Insurance and why do I need to pay it?
Good question. Almost everyone has heard of National Insurance but if you’re an employee you may not have any dealings with it; become self-employed and suddenly it’s a big deal!! National Insurance contributions from each member of the public ensures your entitlement to state benefits such as State Pension and other social security benefits. Payments stop when you reach retirement age and the amount you pay depends on factors such as how much you earn and your employment status (self-employed/employed etc.). It is a legal requirement that it is paid so it’s a good idea to get on top of this early on so you don’t get a back-log of overdue invoices from HMRC! It’s usually a small amount each week but it soon adds up if you’re NOT paying!
How much do I need to pay?
Self-employed workers pay Class 2 AND Class 4 contributions:
* – Class 2 is a flat rate of £2.40 per week – payable monthly by Direct Debit or as a quarterly bill.
* – Class 4 are paid as a percentage of your annual taxable profits – 8% between £5,715 and £43,875 and a further 1% on any profits over that amount – payable when you pay your Income Tax.
How do I set up payments or find out more about them?
* – Download this form to set up your Direct Debit payments:
http://www.hmrc.gov.uk/pdfs/ca5601.pdf
* – Call the very helpful HMRC’s National Insurance Self-Employed Helpline on Tel 0845 915 4655 (8am-5pm Mon-Fri).
Once you’ve done that….you’re pretty much sorted on the legal stuff! If you do want to set up for VAT if you’re expecting to earn over £68,000 in your first year, contact the Self-Employed helpline on 0845 915 4515.
What about Tax-Returns? Aren’t they horrendously difficult and scary?
* No!! Not if you’ve been a good boy or girl and kept up with your accounts/receipts-keeping skills over the months. The first time I did mine, I went to my local tax office to get them to help me – it took five minutes!
* You’ll need your net and gross profit figures, your business goings for the year, any taxable social security benefit numbers and that’s about it. You can file your tax return online and follow the links or go and get help at your local tax office like I did. For all things tax return-related, follow this link; http://www.hmrc.gov.uk/SA/index.htm
* Most importantly – don’t dread it! Keep on top of your accounts, get help completing it if you’re not sure and get it in on time to avoid the £100 penalty. It’s a doddle after that!
Setting up as self-employed can seem scary but it’s not that bad really – there’s so much help available if you’re unsure of anything! Here’s a round-up of all the numbers and links you might need so they’re all in one place (rather than scanning through the above article again!)
* www.hmrc.gov.uk/selfemployed/ – HMRC website for all things tax/NI/employment-related!
* Business Link site – helpful information, tips and articles on setting up:
http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073858805
* Newly Self-Employed Helpline (for all general enquiries) – 0845 915 4515 (8am-8pm Mon-Fri & 8am-4pm Sat-Sun)
* National Insurance Registrations Helpline: 0845 915 7006 (8.00 am to 5.00 pm Monday to Friday)
* Registering as self-employed online:
https://online.hmrc.gov.uk/shortforms/form/CWF1ST?dept-name=CWF1&sub-dept-name=&location=40&origin=http://www.hmrc.gov.uk
* Registering as self-employed by post – downloadable form: http://www.hmrc.gov.uk/forms/cwf1.pdf.
* National Insurance helpline no.: 0845 915 4655 (8am-5pm Mon-Fri).
* Downloadable form to set up National Insurance payments by Direct Debit: http://www.hmrc.gov.uk/pdfs/ca5601.pdf
* Self-assessment & tax returns website: http://www.hmrc.gov.uk/SA/index.htm
Phew! Hope that hasn’t ‘taxed’ you too much! (Groan!). Talk to other artists who are working for themselves to get a good idea of what’s involved and for tips they might have to pass onto you. Be disciplined when it comes to your accounts and you shouldn’t have any problems…..and the best thing is, you’re now your own boss and are doing a job that you feel passionate about! Perfect!
