What You Should Know About Being Your Own Boss

Starting Out as Your Own Boss

When you’re self-employed you’ll take on new responsibilities. For some entrepreneurs, this is a dream, and for others, a nightmare. When deciding whether or not you should start being your own boss, you should consider the following:

  • Can I afford to be self-employed?
  • Have I found a gap in the market?
  • Is my idea unique or niche enough?
  • Will being my own boss make me happier?

Some business owners can see real rises in profits early on in their journey, whilst others may face real hardships to break-even, to begin with. One of the big lessons to learn early on is budgeting. Both in terms of your time and your money. Here are three things to bear in mind when becoming self-employed:

1. Balancing the books

Try to minimize time spent and maximize money earnt. Sometimes this will require investing in agencies, equipment, subscriptions, or training to help give you a stronger business model.

Every self-employment ‘being your own boss’ journey starts differently. But creating a cost-benefit analysis of different parts of your business could be very valuable in your new venture.

2. Gaps in the market

Another thing to always look out for is the ever-changing landscape of your business and how that fits into the wider market. Imitation may be the highest form of flattery, but not to your bank account.

If a competitor is moving in on your niche, now may be the optimal time to innovate and further develop your product or service. Alternatively, finding ways to get your product or service to market faster and cheaper could help give you a competitive advantage.

3. Self-care in the workplace

Chasing your dream may not always feel like work, but when you’re self-employed it very much is and it’s important to remember to look after yourself, as well as your staff. Don’t forget to have breaks, have lunch, and check in on your own well-being.

As an employee, you’d usually have opportunities to reflect and relax within the hustle and bustle so it’s important to create these moments for yourself in your new working structure. Your creativity and productivity will likely increase if you aren’t overworked, meaning you may produce better work.

Benefits of Being Your Own Boss

Within the spectrum of self-employment, there are different specialisms: contractor, freelancer, sole trader, and so on. But even between these role variations, the pros remain the same: choosing your own hours, doing the jobs that you want to do, and taking annual leave without the approval needed. You have complete control of your career and working schedule when you’re being your own boss.

This level of flexibility is one of the biggest drivers for most self-starters to make the jump to self-employment.

Sounds lonely? It doesn’t have to be, not all business owners work alone. Around 40% of UK workers now hold down two jobs: their regular ‘day job’ and their self-employed ‘side hustle’. Supplementing your steady income with some extra cash is by itself a perk. But pursuing your passion on the side is a good way to balance the risks against the rewards.

Starting a Second Career in Later Life

Not all self-starters are young entrepreneurs. Being your own boss can earn you a bit of extra income in retirement (or for retirement). Recent trends in self-employment show that the largest age group is actually 45 to 54-year-olds, with many more over 65s becoming self-employed to boost income.

Our aging population may not want to give up working later on in life. And in real terms, this could mean more money in your pension. Or perhaps it will help create a comfortable retirement when you do eventually decide to wind down. Embarking on a second career and rediscovering your passions could be the perfect recipe for a happy retirement.

Get Your (tax) Ducks in a Row

The term ‘self-employment’ covers a lot of different kinds of jobs and there are diverse implications to how your business operates – and how it’s taxed. Here are two types of self-employment that you can register as:

  1. Sole traders are quite common – with all profits taxed similarly to how income tax is charged on an employee’s gross salary. Watch out for registering for Value Added Tax (VAT) if your business earns more than £85,000 per year. If you’re uncertain about your tax situation, you may want to seek professional advice.
  2. Private Limited Company is another option. Creating a distinction between you and the company means two types of taxation: one on the salary you receive, and the other on profits the company makes. You could end up paying less tax depending on how successful your business is, and what salary you grant yourself.

Update your calendar with upcoming deadlines to stay in control:

  • 5 October 2022 deadline for registering as self-employed in 2021-22 tax year.
  • 31 October 2022 deadline for filing paper tax return for 2021-22 tax year.
  • 31 January 2023 deadline to file and pay your Self-Assessment form.
  • 6 April 2023 beginning of the 2023/24 tax year.

Hannah, a self-employed PensionBee customer, said: that having “transferred multiple pensions into one place, it was very easy and pretty quick.

The app is easy to use and you can see your pension in one place without having to wait for an IFA to send you a report each month/year. Easy to set up and cancel a direct debit payment and where I’m self-employed it’s helpful to be able to do this as my income changes month to month. Very happy.”

Wrapping Up

All businesses, big or small, need a safety net for less profitable periods. Some companies, or even consumer demands, are seasonal. There will often be unseen costs when starting out, or setbacks outside of your control. From a financial crisis to a worldwide pandemic. Businesses, and the environments they operate within, are rarely entirely predictable.

Creating a rainy day fund covers a lot of potential pitfalls when starting out as self-employed. Navigating those tricky early years, reducing the negative impact of cash flow problems, or even building up an expansion fund when you become your own boss. Being confident in your finances and pension is one step on the road to financial freedom.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Ready to get hired? At Twine, we have dozens of top-quality jobs being posted each and every day. From design to marketing, development to copywriting – there’s a job ready for your skills. Join the marketplace of diverse creative talent here.

Morris Overton

Morris is a Risk Manager at PensionBee, where he’s motivated to make saving simple and safe. Before joining the Risk Team, Morris was a specialist Pension Transfer Manager in the Customer Success Team.