Could anybody walk me through becoming self-employed?

[captainchaos]

(namechanged because I'm giving more detail than I usually would)

I'm currently employed by a charity running activity groups for people with learning disabilities. The groups are partly funded by a charity and part through individuals' personal budgets. Our charitable funding is due to expire shortly, and my employer has expressed that they will be unable to sustain the courses, although they are still exploring alternatives. So my colleague and I will be made redundant at that time.

Having done some maths, we can see that my colleague and I can easily keep the courses running on our own without charitable funding, because we won't have to maintain the overheads of the large company.

But I don't know much about being self employed. Do I need to set myself up as a limited company? How does it all work?

You do not need to set up as a limited company. You can run as a sole trader, or if partnership with someone else if you prefer. As a sole trader you need to register to be self employed with the Inland Revenue - i'm sure you can do this online. You would then submit your accounts annually. Remember to also sort your National Insurance contributions. If you think you will make a profit of less than about £5k you won't need to pay class 2 National Insurance contributions - otherwise you need to pay this either quarterly or monthly by DD. You pay tax and class 4 NI on your profits and this is usually payable twice a year. Remember to keep good records of all expenses so that you can prepare your profit account in order to calculate taxes due. Good luck! xxx

There are advantages to setting up as a limited company though - and it needn't be expensive to do. Check out whether there are resources for people like you locally. I know that in my area there is an enterprise centre thingummy where you can go and get basic advice about setting up a business - e.g. key things to know about the legals, accounting requirements etc. They run seminars for people looking to set up businesses. I imagine similar schemes exist nationwide.

Sorry am just going to put DD to bed so not got time to post links etc but if you google you should find something.

Keep all your receipts. Get an accountant for year end accounts, they can be a real help in knowing what are tax deductable expenses, even if you keep your own income and expenditure list. Keep a record of any mileage that you do in your car for business. Also a designated phone for business use is useful. Your local Chamber of Commerce or Business Link, may offer a short course on self employment in your area.
Its not too hard.

No you don't need to set up as a limited company, but if there is someone else involved in the business you need to have some formal structure whether it is a limited company, a partnership or an employer/employee relationship.

There are advantages and disadvantages to every set-up and you really need to talk through the particular circumstance of what you want to do with someone. Business Link is a good place to start, and they have lots of information online as well as local events.

Just a couple of comments on what others have said: if you are going to be self employed do NOT apply for the low earnings exemption from Class 2 NI even if you think your earnings are going to be below the threshold - it only costs £130 a YEAR and entitles you to a number of benefits (unless you have looked into this in detail and decided that you have nothing to gain from the benefit entitlements).

And while it is very easy and costs very little to set up a limited company, you need to budget for enough to meet the ongoing accounting and reporting requirements - I would suggest around £600 a year, although you can get a cheaper service particularly if you deal with a modern online practice, and if your earnings are over about £14k you will save more than that in tax compared with self employment.

OP
THis was written for ebayers but most of the information is generally applicable, I don't think any of the links are broken
feel free to print it out
coffee and highlighters are recommended
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Thanks for your responses, that's given me a lot to think about. I'm thinking I'll go with an accounting service to save stress and make sure I'm getting things right. And I'm not yet sure whether sole tradership or limited company status will be right for me.

So as a sole trader, I'll need to budget for:
*venue bookings
*Public liability insurance
*VAT
*consumable supplies (stationery, etc)
*mileage
*accountancy services
*tax & NI
*activity fees (out & about with the group)

Am I missing anything obvious?

You should talk to an insurance broker about what you plan to do, because I would imagine this is a specialist area of cover. Find out who the charity uses and ask them.

You will need a robust set of policies for managing the trips, ensuring clients' safety, emergency response, CRB and other employment checks, general health and safety, etc - again a good crib from the charity's procedures manual would be a good idea.

I think that for this work you would be wise to consider a limited company. If anything goes wrong then hopefully there is insurance to cover it, but if you are self employed the claim will be against you with your home on the line: you can walk away from a company. It may be that a not-for-profit company would be suitable, but probably not a charitable company (too much admin).