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Page 1 of 2 Frequently Asked Questions (FAQ)
Q1: I want to start up my own business when do I need to register as self employed?
As soon as you start to advertise or sell your goods and/or services.
Check www.hmrc.gov.uk for more information
Q2: Do I need to form a limited company?
Not necessarily, it depends on your situation. Check www.businesslink.gov.uk for fact sheets on company structure.
The easiest and most common way is to set up is as a sole trader, whereby you are responsible for all profits and liabilities. All you need to do is register as self employed (see q1), choose a trading name and keep all financial records.
Although you take all profits from the business you are also liable for any debts and any personal assets are unprotected
Q3: How does this effect my National Insurance contributions?
Once you register as self employed you are eligible to pay Class 2 contributions and once your profit reaches a certain amount you will also pay Class 4.
If you earn less than £5075 from your business you can apply for a Small Earnings Exemption certificate see www.hmrc.gov.uk/working/intro/selfemployed.htm
Q4: But I also work part-time for an employer – does this make a difference?
As an employee you will automatically be paying Class 1 National Insurance Contributions. However, Class 2 is treated separately as part of your own business activity.
Q5: If I register as self employed will this effect my Tax Credits?
You can receive Tax Credits whilst self employed. It depends on how much money you earn and you should contact your local HMRC office to discuss your particular case.
Q6: Do I need to keep any records?
Yes. You have a legal obligation to keep all financial records to do with your business – invoices, bank statements et c. Keep for a minimum of 6 years
Q7: What insurances will I need?
This depends on your type of business. Common insurances include:
- Vehicle
- Product
- Public Liability
- Content
- Employer’s Liability (if you employ people)
Q8: Do I need a business plan?
Business plans have varying objectives. If you are applying for a bank loan or funding, you will undoubtedly need a full business plan with clear financial planning for your business.
On the other hand you may just want a business plan which sets out your business idea and how you are going to make it happen. It is also helpful to have a cash flow projection which will show you how your money flows in and out of the business. See factsheet Creative Business Plan
Q9: Do I have to keep financial records?
Absolutely. It is a legal requirement to keep a record of all your financial transactions:
- Payments
- Invoices
- Bank statements
- Day sale book
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