There are many reasons why becoming a sole-trader is the most popular option for self-employment. For one, it is the simplest business structure to set up and maintain. There is no need to register with Companies House or submit annual accounts, and you can start trading as soon as you have your business idea in place.

Being a sole trader also gives you complete control over your business. You are the decision-maker, and you get to keep all of the profits after tax.

However, there are some downsides to being a sole trader that you should be aware of before making the jump into self-employment. Here are 5 things I wish I knew about being self-employed:

You can be fined for not registering with HMRC

Being self-employed means you are not an employee, and as such, you are not subject to PAYE. This means you are responsible for paying your own tax and National Insurance contributions. If you fail to register as self-employed with HMRC, you could be fined up to £1,000. So it is important to make sure you stay on top of your tax obligations.

As a sole-trader, you are also responsible for your own business insurance. This includes public liability insurance, which covers you if someone is injured or their property is damaged as a result of your business activities.

You are personally liable for your business

Being a sole-trader can be a risky business venture, as you are personally responsible for any debts or liabilities your business may incur. If your business fails, you could find yourself in financial trouble.

It is therefore important to do your research and make sure you are aware of the risks involved before starting out on your own. There are a number of free resources and support groups available to help you get started, so make sure you take advantage of these.

Operating as a sole-trader can be a lonely experience, as you will not have any employees to interact with on a daily basis. If you are used to working in a team environment, this can be a tough adjustment.

You need to be good with money

When you’re self-employed, you’re responsible for your own tax affairs. This means that you have to declare your income and pay any taxes owed directly to HMRC. You don’t have the luxury of having an employer take care of this for you.

One advantage of being self-employed is that you can usually claim a number of tax deductions. This can reduce the amount of tax you have to pay. However, it’s important to keep accurate records of your expenses so that you can back up any claims you make.

Self-employment also has a number of other financial implications that you need to be aware of. For instance, you may need to set aside money to cover your self-employment tax bill.

Being self-employed can be a great way to earn a living, but it’s not without its challenges. Make sure you are prepared for what lies ahead by doing your research and seeking out support when you need it. With the right knowledge and planning, you can set yourself up for success.

You can always take on employees to grow your business

As a sole-trader, you are allowed to employ people to work for your business. This can be a great way to get help with the day-to-day running of your business, as well as freeing up some time so that you can focus on other aspects of your business.

However, there are a few things to bear in mind if you are thinking of employing someone. Firstly, you will need to comply with employment law. This includes things like providing a written contract of employment and paying at least the minimum wage.

You will also be responsible for paying the employer’s National Insurance contributions and setting up a pension scheme for your employees. And finally, you will need to make sure you have the correct business insurance in place to cover your employees.

While employing someone can be a big responsibility, it can also be a great way to take your business to the next level. So if you are thinking of taking on staff, make sure you do your research and put the necessary systems and processes in place to make it.

At some point (hopefully) you will need to register for VAT

If you are self-employed and earn over £85,000 per year, you will need to register for VAT. This is separate from your self-assessment tax which means that you will need to declare your income and expenses directly to HMRC every quarter.

There are a number of benefits to registering for VAT, including:

•  You can claim back the VAT you have paid on business expenses
• You can charge VAT on your products and services, which can help to boost your profits
• You may be able to reduce your tax bill by claiming back the VAT you have paid on business purchases

However, there are also some downsides to registering for VAT, including:

•  You will need to charge VAT on your products and services, which could make them less competitive in the market
• You will need to maintain accurate records of your income and expenses
• You will need to file a quarterly VAT return with HMRC

If you are self-employed and thinking of registering for VAT, it’s important to weigh up the pros and cons to see if it’s right for your business.

You can always convert your Sole-Trader business to Ltd Company

If you are self-employed and running your business as a sole trader, you may at some point decide that you want to convert to a limited company. This can be a good way to protect your personal finances and limit your liability in the event of business debt.

There are a number of things to bear in mind if you are thinking of converting to a limited company. Firstly, you will need to comply with the company law. This includes things like registering your company with Companies House and having a written constitution.

You will also be responsible for paying corporation tax on your company’s profits. And finally, you will need to make sure you have the correct business insurance in place.

Converting to a limited company can be a big decision, so it’s important to do your research and seek professional advice before making the switch.

As a self-employed worker, you are responsible for the success or failure of your business. This means that you need to be prepared to wear many hats and take on a range of responsibilities. While this can be daunting, it is also an exciting opportunity to be your own boss and build something great. With the right knowledge and support, you can succeed as a self-employed worker.

If you are thinking of becoming sole-trader, make sure you do your research and put the necessary systems and processes in place to make it a success. And always remember, you are not alone – there is a community of self-employed workers out there who are ready to support you.