As per a recent survey, around 3 in 10 people in the UK are self-employed and this figure will most likely rise during 2018 and even more in the years to come. The gross job dissatisfaction among the Brits is leading them to ditch their corporate cubicles and decide to work it out alone. After spending a life under their bosses, they are now happy to spend a self-employed life where they are their own bosses.
But as they say that starting off a business is not an easy task, hence there are definitely few essential financial tips that you need to take into account before starting off with a business or welcoming your self-employed life. Here are few financial advices which the self-employed in the UK should know about.
- Conventional accounting vs. cash basis
When you initially start off with a business of your own, you will require deciding the kind of accounting system which you wish to use and this will depend on the income and the way in which you would like to pay tax on it. If you run a self-employed business or a sole trader, this is a perfect way of organising accounts. In case of cash-basis accounting, there is a limit and your income can’t exceed this. On the contrary, traditional accounting demands you to show what you owed and not what you received. This closely refers to unpaid invoices and the invoices which you haven’t paid for.
- Set a bank account for your business
It is vital to keep your personal and business finances separate if you are eager to track your income and get a clear view of your expenses. When you think it’s time to invest in training, inventory, equipment, withdrawing money from the business account is a simpler process rather than amalgamating it with your personal account.
- Keep a record of expenses and income
For the self-employed in the UK, accounting is a rather simple, especially when you track your expenses and income on a daily basis. By utilizing your accounting software, keep a tab on sales payments, invoices and other work. The same is true for the expenses as well since you can record the costs that you paid for the business equipment and other expenses. Just as you have to keep in mind the insurance for self-employed, similarly, these also needs to be kept in mind.
- VAT registration
It is a pretty common idea that the self-employed people will decide about their VAT registration either because their yearly turnover surpasses the threshold or to make it simpler for accounting. In case it’s likely that your turnover will surpass that year’s threshold within the next year, you should certainly register for VAT.
Therefore now that you know the things that you should definitely know before beginning the life of a self-employed, don’t waste any time in deciding what to do and what not to do. You may even hire a financial advisor for expert help.