New to contracting? Here’s 20 self-employment tips for 2022

New to contracting? Here’s 20 self-employment tips for 2022

01/07/2022 - 09:55

Are you thinking about making the switch to work for yourself in 2022? You’re not alone. There are an estimated 4.3 million self-employed workers in the UK, but this is down from a peak of over five million at the start of 2020.

The pandemic has reduced self-employment, but numbers are starting to climb again.

Whether you are contracting through your own limited company or working through an umbrella company, working for yourself can be incredibly rewarding. It can help you do what you’re passionate about and gives you more freedom.  

But there are downsides to self-employment too. Many self-employed workers work long hours, have irregular income and need to spend time on some boring stuff like admin and taxes.

If you’re thinking about going it alone this year, these 20 tips will help you find balance, manage financially and look after yourself.

1) Find your why

Self-employment can be tough. If you’re going to make it a success, then you need to be clear on why you’re doing it.

2) Budget your costs

You’re likely to incur some costs when you’re starting out alone. Keeping these costs low boosts your chances of success, so make sure you budget effectively.

3) Get ready to take on multiple roles

Employees have one job. But working for yourself, you need to be your own admin assistant, marketing executive and financial director.

4) Keep tax records

If you are a sole trader or limited company contractor, it’s vital you keep good tax records. This will make life much easier at tax season.

5) Set tax money aside

If you earn less than £50,000 then saving a third of your income should be more than enough to cover Income Tax and National Insurance Contributions.

6) Think about VAT

If you’re a limited company contractor then you’ll have to register for and begin charging VAT if you turnover more than £85,000 in a 12-month period.

7) Keep business and personal finances separate

Opening up a separate bank account for your business can make it easier to manage your money. This is essential if you’re a limited company contractor.

8) Set a day rate that works for you

Knowing your worth is important but setting a day rate will always be tough. Seek advice from friend and mentors and, if in doubt, increase your rate.

9) Get clued up on IR35

If you want to work as a limited company contractor, you need to make sure you understand the off-payroll working (IR35) rules.

10) Ask clients about IR35

When you’re discussing new contracts, IR35 should be one of the first questions on your lips.

11) Specialise as much as you can

One of the best ways to avoid being trapped inside IR35 is to specialise in a niche area.

12) Check an umbrella company’s industry accreditations before signing up

Choosing an umbrella company can protect you from the IR35 system, but you need to make sure you use a compliant supplier. The best way to do this is to check that they are accredited by a reliable body like the FCSA or APSCo.

13) Avoid ‘too good to be true’ umbrella deals

If an umbrella company’s take home pay is ‘too good to be true’ the scheme is likely to be unlawful.

14) Make sure you exercise your employment rights

One of the advantages to working through an umbrella company is that you get certain employment rights guaranteed. Make sure you understand these rights and the umbrella company doesn’t withhold them.

15) Use your umbrella rewards

Being part of an umbrella scheme often gives you access to certain rewards like healthcare schemes, memberships and discounts.

16) Know what expenses you can claim

Whether you’re working through an umbrella company or are self-employed it’s important you know what expenses you can claim.

17) Save for later life

Research consistently shows that freelancers and contractors don’t save as much as their employee peers. Make sure you’ve got an eye on retirement.

18) Look after your mental health and wellbeing

Working for yourself can be mentally draining. Doing small things like taking more exercise, spending time outside and connecting with friends and family can help look after your wellbeing.

19) Be adaptable

When you work for yourself, you need to make sure you stay resilient in the face of adversity. One of the best ways to do this is to be adaptable to new situations.

20) Get professional finance advice

Whether it’s an accountant, financial planner or your umbrella company, make sure you’re getting professional advice that you can trust.

For more information about working with an umbrella company, speak to a member of our team. Call: 0800 121 6513.