What’s better, self-employed or PAYE?When you are officially employed by a company, your employer takes care of your PAYE for you. While your salary is being taxed, you don’t need to handle any of the admin involved unless you are making an additional income from another source outside your job. As a self-employed person, you are fully responsible for your own taxes. Once you’ve registered with the HMRC, you’ll need to submit a Self Assessment tax return form. Once this has been reviewed, you will be sent your tax bill, and you will also need to pay NIC. When it comes to benefits, employees have it way better. Employees are entitled to sick leave, maternity leave and many other benefits each year. As a self-employed person, if you don’t work, you don’t make money in most cases, and while certain benefits are available to the self-employed, they are far harder to come by.
Do you earn more being self-employed?It is impossible to say whether you earn more being self-employed or employed. Those that are just starting their own businesses often don’t make any money for the first few months and often require a fair amount of capital to start up their businesses. Each month the money they make will depend on the success of their business. The amount that self-employed people make often fluctuates greatly from month to month. In contrast, employed people earn a set amount every month. Even if you work on an incentive/ commission basis, you should still have a set basic income that you can depend upon each month. This makes it easier to budget and plan for big expenses, like saving up for a car or a holiday. That being said, when you are employed by a company, there is usually a limit to how much you can make each month. Not to mention, raise and promotion opportunities may be few and far between. Being self-employed means that there are no limitations on what you can earn each month. If your business begins to really take off, and you equip yourself with the right skills and tools, you have the opportunity to become very successful in a short amount of time. So whether you make more money being employed or self-employed, it all depends on your individual situation. Keeping that in mind, in the UK, self-employed people do make a fair amount more than the average salary of an employed person. In a recent study of 5010 self-employed people in the UK, it showed that their mean annual revenues were £32,623. This is £5,000 more than the average employed person, with the self-employed working an average of 10 hours less each week. Studies like this can be somewhat detrimental as it encourages people to leave their regular jobs and pursue business ventures without the right skills or tools. If you want to be a successful self-employed person, you’ll need to have capital, an innovative idea, and a strong skill set in order to beat the competition.
Will I work fewer hours if I’m self-employed?One of the main advantages of being self-employed is getting to decide your own working hours, and only work when you feel like working. While most self-employed people work fewer hours every week than employed people, it usually takes an incredible amount of time and effort to start their businesses and develop the necessary skills in order to become successful. Employed people’s official working hours are also usually consumed by unnecessary meetings and chit chat, while self-employed people’s official working hours are consumed by work. It also takes an incredible amount of self-discipline for self-employed people to get everything they need to do done with no supervision. Employed people are used to having their employers guide them and tell them what to do, so it can be difficult to maintain motivation and work ethic without someone to report to.
What about being employed and self-employed?In the UK, it is possible to be employed and self-employed at the same time (as long as your current employment contract allows for you to have a business of your own). While it can be a tricky balancing act, starting your business while you are still employed may be a great option for many aspiring business owners as you’ll still be making a steady income. Business owners that want an additional income stream may also apply for regular jobs. Depending on the current demands of your business, you may want to look for employment opportunities that are part-time or allow for flexible working hours. Being both employed and self-employed may be able to help you choose which option suits you best. There are many people in the UK currently holding both positions, so it is definitely possible.
Changing between being employed and being self-employedMaking the change from being employed to being self-employed is quite significant. Before you make this big decision, it is best that you do some planning and research and decide what type of work you’re going to do as a self-employed person. Will you start a business from home? Will you work as a freelancer? Will you work online? Once you have a plan in place, you’ll need to resign from your job officially. Depending on your contract, you may need to give a couple’s months notice, so keep that in mind. As soon as you start working in a self-employed position, you’ll need to register as a sole trader or limited company with the HMRC. You’ll also need to meet all of your responsibilities as a self-employed person, which means completing a Self Assessment tax return and paying your own NIC.
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