To ask what you wish you'd known before becoming self employed?

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I'm looking to set up a freelance business after many years of full time employment. Is there anything you would have done differently when you were starting out?

Give yourself longer before expecting to make a decent profit - I gave myself a year but realistically it took 2 before I was earning enough to live on

I didn't realise how much time I would spend chasing payments and wasn't really ready for how many people would try to avoid paying full stop.

I would have been better off employing an administrator to do the background work so I could focus on delivering the service I was providing.

That I would not be able to take time off as frequently as I would like and that I would be begrudged every day that I took off by my clients! This has been my biggest bugbear!

To get my head properly around corporation tax, personal tax & VAT.

I'm not self employed or even employed but i am an accountant and there are two words that self employed people often need to get familiar with which isn't something you need to think of when you are an employee: CREDIT CONTROL. if you can insist on payment upfront - do it! if not, be prepared to chase debts, or if this is not your thing, employ someone to do it for you!

Cash flow. Cash flow and cash flow. I wouldn't have quitted my job until it had gained traction.

Agree with the above comments about payments etc and credit control.

I tutor privately and have 18 clients a week. I do a lot if chasing for payments even though I insist on payment upfront.

I've lost count of the number of people who think I'm doing it for fun and a bit of pin money because I work from home.

I wish I'd got a proper set of terms and conditions sorted right from the start.

Oh, and a separate bank account for all self employed earnings and expenses is the best thing I ever did!

I spend so much time chasing people for money. I hate it but clearly I can't work for nothing. If you can't be tough then outsource it and get someone else to do it for you.

If you make under the threshold don't opt out of Class 2 NICS. It's the cheapest insurance you can get - it protects your entitlement to benefits, and covers you for the contributions towards your state pension (this might be sorted if you claim child benefit - I mention it in case you don't).

I didn't opt out, but an acquaintance did - she got pregnant and managed to pay in enough weeks of class 2 NICS to qualify for the full rate of maternity allowance just in time. The difference was several thousand pounds.

Again
Chasing debts.
I am a landlord and I have found that about 10% of my tenants fail to pay the rent.
Some just skip off others think that a few days / weeks late won't matter

Not realising just how many people will want things done for free or with a huge discount because you know them.

How to set proper boundaries on my time. It's so easy to be tapping away on a laptop at 11pm or when the children get home from school....or on your phone at other times. Your business is your baby and there can be so much to do, but I found it was important and healthier for me to not be eg. marketing myself at 1030pm on Facebook, even if I felt passionately that I needed to get it done.

That large companies tend to be far worse at paying than smaller companies.

That many/most people will do whatever they feel they can get away with.

That people will think nothing of expecting your services/expertise for free.

That you need to look out for yourself because sure as hell no-one else will.

Religiously organise all your receipts, contracts, bank statements and records of all financial activities, including significant private transactions outside of your business (mortgage or car payments). And to state the obvious, please don't be tempted to do work without an invoice or throw in private spending as business expenses.

I've been self employed for over 10 years and always assumed I'd never be audited because why would they even bother with a tiny 1-person business that's similar to thousands out there. Though it happened recently and the taxman raked over every single statement from 6 years ago and I had to produce statements and contracts for my private expenditure as well.

In then end they found nothing, and I'm so grateful that I declared every penny of my earnings and paid full tax over the years. And of course, I was able to produce the paperwork to back it up. Even if you work honestly but have a sloppy bookkeeping system then you can still be penalised if you can't find the receipts or statements to prove a transaction.

Getting an accountant - a good one is so valuable to your business.

Mine has helped me so much because until I got really up and running there was so much I didn't know about tax and legal ramifications of anything financial.

They were patient with me and proactive, letting me know what i needed to do with clear deadlines and explanations.

Find a good local one so you can drop in if you need to discuss things.

Forever chasing payments!! People seem to think I teach their children for free.

So much great advice, thanks so much everyone. I've built up a bit of a cash cushion and am preparing myself for no more scented candles or Deliveroo for the forseeable future.

So, credit control is clearly huge. I'm thinking back on a supplier I used for a job last year and feeling doubly guilty about how utterly shite my employer was at settling their account.

Cordelia, thanks for the NICS tip (totally new to me, so will look into it)

YassKween (great name, BTW) great, thank you. I'm actually seeing an accountant tomorrow. I've met him once before and he seems very sensible.

Iris I think I'm going to have to get much more grown up about boundaries of all kinds. No DCs at home, so it would be so easy for me to turn into a completely unstructured pyjama-wearing blob.

Pastel that's very useful advice, because I've been having greedy thoughts about everything I might be able to write off to tax, so if I just function under the assumption that I WILL get audited, safer in the long run.

Oh, and Marella I'm going to pretend I didn't read your post, because I'm soothing myself by fantasising about all these great free-wheeling holidays I'm going to take that I secretly know are never going to happen because I am too much of a stress monkey

Chasing invoices can be quite tedious, although I have been lucky with most of my clients and they pay promptly.

The other nasty surprise is tax although I haven't had to do a tax return yet - when you do, you don't only have to pay the tax for this year but also an advance on the following year. So eg if your tax for this year is £5000 you will have to pay £7500 (at least).

If you travel by train, take photos of your tickets if you don't have a receipt because the ticket barriers often eat them!

Don't scrimp and try to do things on the cheap.

When I started my business, I was arrogant enough to think I could run it with a minimum of cost, i.e. a clunky old computer & printer, free software, etc. It just meant I wasted FAR too much time which cut down the amount of productive/chargeable time I could do. When I finally saw the light and bought a decent computer, duplex laser printer, decent software, etc., I was revolutionised and could double my productive work because all the admin work could be done so much quicker. Until you've been there, it's hard to imagine how much quicker and more efficient you can be with investing in proper equipment rather than trying to do it on the cheap.

Setting aside funds towards tax each week/month and yy to the tax “money on account” thing of prepaying. That can eat a bag of dicks.

The other nasty surprise is tax although I haven't had to do a tax return yet - when you do, you don't only have to pay the tax for this year but also an advance on the following year. So eg if your tax for this year is £5000 you will have to pay £7500 (at least).

I understand why people think that, but it's not true. You're paying tax for LAST year and a further half towards the current year (when you're 10 months into it) with a further half for the current year 4 months after it ends. So, you're still paying after you've made the profits, not "in advance" at all. Basically, you've always had the profit before you pay tax on it. You just need to save enough each month based on profits made in that month and you'll never get caught out.

The feeling of responsibility is massive...

Remember to give yourself time off. My partner and I were both self-employed when we met and had DC1. For the 1st 5 years we didn’t have a holiday because we counted up loss of income and wasted nursery fees and added them to the cost of a holiday. It terrified us into not going away ever! It’s taken me years to realise that I HAVE to take time off, and that my price for work takes into account the time I’m not working. Otherwise you’re heading for total breakdown. Good luck x

Get a good accountant who understands your business - many specialise and it's also worth asking for recommendations.

Don't underestimate the value of outsourcing expertise. I initially tried to set up my own payroll which should be easy but wasn't for me. The intense relief handing it over to someone who sorted it in a few hours was priceless.

Use the power of the Directors pension to offset tax and plan for your future. A good SIPP used wisely is very tax efficient.