Resources

Routes To Self-Employment: Which One Should You Choose?

Blog
Routes To Self-Employment: Which One Should You Choose?

There’s a lot to take into account when going down the path of self-employment. This includes the operational structure of your business and how you’ll pay tax, which seems like a whole other world when you’ve spent most of your career as an employee.

You may have seen the terms ‘sole trader’, ‘umbrella solution’ and ‘limited company’ floating around before, but which one is most suited to you? We’ve put together an overview on each, so you can easily choose which route to self-employment to take.

Sole Trader

It’s straightforward to get going as a sole trader. The set-up process consists of registering with HMRC, with minimal startup costs. You’ll also have complete control in terms of decision-making and how money is spent. 

There’s less accountancy involved, too. You’ll have to submit a Self Assessment tax return, but the likes of corporation tax won’t be a concern.

Bear in mind, the sole trader route does have one considerable disadvantage. You’re not legally separate from the business, so if it makes a loss, your personal assets are at risk. 

Umbrella Company

With this option, the tax return isn’t a bother as you’re technically an employee of the umbrella company. The organisation handles all the payslip deductions like an ordinary employer would, so you won’t have to do any calculations or worry about putting money aside to pay tax later on. However, this does mean you relinquish an element of financial control.

The umbrella solution is a particularly good choice if you’re unsure how long you’ll be self-employed for. In some cases, you might be hired for a short-term project, for example.  

Limited Company

The limited company route involves more accountancy admin – with corporation tax and dividends requiring consideration. But there’s also the opportunity to make significant tax savings, especially as you can generally claim more expenses by selecting this option.

A limited company does present the potential issue of IR35 legislation, especially with the recent public sector and planned private sector reforms. Your personal assets won’t be at risk with this route, as any business losses will be liable to the company. It’s also a good option if you ever want to easily switch from contractor to business owner.

Each route has its advantages and disadvantages, but whichever option you choose, it pays to have an expert on hand to help with the financial side of things. 

Bright Ideas are here to offer you all the support you need. You can book in a FREE consultation with our team by calling 0161 669 4221 or sending an email over to info@biaccountancy.com.

To book in a FREE consultation, contact us today on 0161 669 4221 or info@biaccountancy.com.

You may also be interested in…

Stay up to date on what’s new at Bright Ideas.

    Step 1 of 3

    Thanks for choosing Bright Ideas!

    Let’s get started with a few details…

    (*) Required field
    The field is required
    The field is required
    Email address is invalid
    The field is required
    By submitting you agree to our Privacy Policy

    How can we help?

    I need accounting support for…

    (*) Required field
    The field is required
    The field is required
    The field is required
    The field is required
    The field is required
    £The field is required
    The field is required
    The field is required

    When’s good for you?

    Pick a slot…

    (*) Required field
    The field is required
    The field is required
    The field is required
    BACKLet's get started
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

      Step 1 of 2

      Become a client

      Let Bright Ideas take care of your accounting. We’re guaranteed to have a solution here that suits your needs. Simply pick the package you like best and we’ll take care of the rest.

      You can sign up for our services right now. Complete the form below and we’ll be in touch the same day (if received before 4pm).

      (*) Required field
      The field is required
      The field is required
      The field is required
      The field is required
      Email address is invalid
      The field is required
      The field is required
      The field is required
      The field is required
      By submitting you agree to our Privacy Policy

      Let’s talk about your business

      Setting up a new business? Already trading as a Limited Company? No matter what your circumstances, Bright Ideas can help.

      (*) Required field
      The field is required
      The field is required
      The field is required
      The field is required

      Included in our company formation service is:

      • Limited Company name of your choice
      • Memorandum and articles of association
      • VAT, PAYE and Corporation Tax registration
      • Certificate of incorporation and Share certificate
      • Companies house registration
      (*) Required field
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required

      Director/Shareholder

      (*) Required field
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required

      Additional director or shareholder (Should only be completed for an additional person)

      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required
      The field is required

      Declaration acceptance *

      The field is required
      The field is required
      BACKLet's get started
      This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

         

        Request a Call Back

        (*) Required field
        The field is required
        The field is required
        Email address is invalid
        The field is required
        By submitting you agree to our Privacy Policy
        This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.