Can you be employed and own a business?Many people in the UK and around the world manage a full-time job alongside a business of their own, and it is becoming more and more common as people look for multiple income streams and additional ways to make money. However, you should read your current employment contract very carefully before starting a business of your own. There may be certain clauses that state that you are not allowed to start a business while working for your current employers. The main reason for this would usually be a conflict of interest and the potential of your business becoming competition for your employer’s business. Employers often don’t like the idea of their employees starting businesses of their own as it could result in employees not putting as much effort into their jobs as they should be and arriving at work exhausted. There is also the risk of employees stealing clients for their new business venture, as well as using company secrets to their advantage. If you’re unsure whether you are legally able to start your own business under your current employment status, the best thing you could do would be to speak to your head of HR. In a confidential conversation, HR will be able to advise what you are and are not able to do while working as an employee at your current job. When starting a business, it’s a good idea to be honest, and upfront with your boss about it, even if you don’t legally have to based on your contract. Open communication is always best, and it will be better than your boss hearing it from you instead of anyone else. Your boss may be able to offer you valuable guidance and advice and support you in your business venture. Suppose you’re in the position where you already own a business and are seeking employment to supplement your income. In that case, you’ll need to disclose the fact that you have a business when interviewing and submitting your CV. If your business currently takes up a large portion of your time, you may want to seek out a part-time job or a job with flexible working hours. Because so many people are in need of extra income, owning a business while being employed is far more common than it used to be, and employers and colleagues are usually very accepting.
Starting a business while being employedPeople start businesses while still being self-employed for many different reasons. Their business may allow them to pursue their passions, they may be starting a business with the long-term goal of eventually leaving their place of employment, or they may simply need to supplement their income. Whenever you start a business, whether currently employed or not, you need to register your business with the HMRC as a sole trader or a limited company. If you are a sole trader, you are self-employed and have full ownership over your business, while a limited company is a distinct company with a brand identity and can be controlled by more than one person. It is advisable to do some research into both of these options to determine which one is suited to you and your needs. It is a legal requirement to inform the HMRC when you start making money from your business. This is so that you can process your Self Assessment and other taxes correctly. No matter how much of a hobby you think your business is, you could end up in legal trouble if you fail to have it registered. Even if you are just cutting hair in your basement, you could experience a sudden increase in popularity which could end up with the HMRC on your case. The next step would be to sort out your business insurance and ensure that that’s taken care of to protect you and your assets in the case of any accidents or disasters. We have dedicated an entire article to starting a business while you are employed, and you can read it here to find out more about this topic and gain knowledge about the steps involved in starting your own business.
Ways in which you can be self employedWhile it is very easy to determine whether you are employed (it says so on your employment contract), self-employment can be a bit trickier to determine. In the UK alone, there are currently 5 million self-employed people, all working for themselves and making money in various ways. While you may not consider yourself a business owner, you are likely to be self-employed if:
- You are working as a freelancer
- You determine your working hours and how, when you work
- You work for a company on a non-contractual basis
- You hire other people to help you with your work
- Provide the equipment needed for you to do your work
- Charge a price for work done or sell products and services for a profit.
What happens if I am self employed and employed?If you are employed and self-employed, you will need to manage your time wisely and be aware of your responsibilities and what is expected from you in both positions. It is your responsibility to research what you need to do in terms of registration and taxes in both positions. The most important factor to note if you are self and employed and employed is that you will have to pay your tax through Self Assessment as well as PAYE. When you are employed, the company you work for should handle your PAYE tax on your behalf. But when it comes to self-employment, you will need to learn how to file your Self Assessment with the HMRC. This can be a fairly confusing process, and you should seek out the assistance of a professional accountant if you find yourself confused. It is very important that you make an effort with your Self Assessment as a self-employed person as having your taxes and finances in order could contribute immensely to your success. Be wary of applying for jobs that tell you that your title will be self-employed when the responsibilities are those of an employed person. These employers are often looking to take advantage of people and avoid paying PAYE, leaving you the responsibility of doing a Self Assessment when the company should be handling PAYE for you. Being self-employed does not give you the right to slack off at your regular job. If anything, your performance at work will be closely analysed to ensure that you are capable of holding your job while starting your own business.
National insurance contributions when you are employed and self employedWhen it comes to NIC (National Insurance Contribution), if you are both employed and self-employed, you will find yourself having to pay Class1 NIC on your employed income and Class 2 NIC and Class 4 NIC on your self-employed income. If you are self-employed, you can also pay voluntary Class3 NIC. However, there are small earnings exemptions for self-employed people making less than a certain amount each year. Not paying NIC can be considered a serious offence, and you should prioritise paying this and ensuring that you pay the correct classes.
The advantages of being self employed and employedThere are many advantages to being both employed and self-employed, and that is why so many people opt to go down this route. Some of the benefits of holding an employment and a self-employment include:
- Multiple streams of income- doing both could double or even triple your monthly income
- Back up plan if either your job or business fails
- You can explore your passion through a self-employment avenue, such as art, design, gardening etc, while still maintaining your job in a corporate environment
- Learn about the pros and cons of employment and self-employment simultaneously and realise which one is better for you in the long run
- Start a business without the risk of not receiving an income for the first few months, as businesses often take a while before they start making money
- Use what you have learnt about business in your job, and use it in your own business
- You’ll have more capital for your business venture
- There won’t be as much pressure for your business venture to succeed as there would be if you did not maintain a job
Maintaining a work-life balance while being employed and self employedWhile there are many advantages to being both employed and self-employed at the same time, there are also many challenges involved in this situation, and it can get exhausting very quickly. The last thing you want to do is start falling asleep at your job because you’ve been working on your business all night long. One of the major challenges that come along with being both employed and self-employed is maintaining a healthy work-life and personal life balance. If you are working a traditional nine to five job and then spending the evenings and weekends working on your own business venture, you may find yourself feeling burnt out with little time to spend with family and friends, and tending to household chores, enjoying hobbies etc. Work will become your life. While making money and pursuing success may be your priority right now, it is very important that your work life does not take over your entire life. Stress and long working hours can lead to various illnesses, and your work/personal life balance should be an important factor in your life. You can maintain a healthy work/life balance by dedicating time slots to certain tasks and setting boundaries when it comes to your self-employed work. If your business starts to get very busy, you may want to consider hiring someone to help you or speaking to your boss about reducing your working hours at your job. Remember to ask for help when you need it. There is no use investing time and energy into being employed and self-employed if it’s going to take over your entire life.
Are you ready to start a business venture while maintaining your job?These are some of the signs that indicate that you may be in a position to handle being self-employed and employed:
- Your job allows for flexible working hours
- You have a great business plan in mind
- You know the responsibilities involved with being self-employed
- You do not have very many demands outside of work
- You find yourself with time to spare in the evenings and on weekends
- You have someone that could assist you with your business if it starts growing
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