Couple of stupid questions about self-employment in the UK
Thread poster: LizNickels
LizNickels
United Kingdom
Local time: 10:20
French to English
Jan 2, 2009

Hi all and Happy New Year!! Apologies in advance for sounding a bit dim in the following questions...

So I am about to set myself up as a freelancer in the UK. As I understand it I have to register as self-employed with the Inland Revenue and after a year-ish they will send me a tax return. Is that all I need to do to 'become' self-employed? It has been suggested (by my husband!) that I set up a limited company to avoid risk but is that overkill for a small part-timer?

Can anyone recommend a UK errors and omissions insurer? I understand that many people on the fora think that this kind of insurance is unnecessary - and I am taking this on board - but I would like to get a few quotes anyway.

Thanks!


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Lawyer-Linguist  Identity Verified
Portugal
Local time: 10:20
Dutch to English
+ ...
Overkill Jan 2, 2009

LizNickels wrote:

So I am about to set myself up as a freelancer in the UK. As I understand it I have to register as self-employed with the Inland Revenue and after a year-ish they will send me a tax return. Is that all I need to do to 'become' self-employed? It has been suggested (by my husband!) that I set up a limited company to avoid risk but is that overkill for a small part-timer?



I looked into moving back to the UK this time last year and had in-depth consultations with accountants in Manchester and Liverpool. We did the necessary number crunching and although I was well above the VAT threshold (then £64,000, if I'm not mistaken), we worked out, in both cases, that it isn't actually worth setting up a company until you gross at least £90,000 per annum.

Most accountant firms in England offer a free first consultation. I'd suggest make use of it and get all your questions answered by a professional, although the staff at Inland Revenue are also generally very friendly and willing to help.

As far as insurance is concerned, I believe the ITI has schemes in place for its members at good rates. Maybe someone else can be more specific on this point.

Hope this helps and best of luck
Debs


[Edited at 2009-01-02 13:29 GMT]


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Tom in London
United Kingdom
Local time: 10:20
Member (2008)
Italian to English
I'm self-employed in the UK Jan 2, 2009

Liz, you're partly correct. You do need to register with Revenue and Customs (previously known as the Inland Revenue). Yes, you do need to compile an annual tax return (self-assessment) and pay whatever tax is due. You also need to start keeping your own monthly accounts (incomings and deductible outgoings) for inspection if necessary, so it's very important to keep all your invoices and receipts in the correct way. You will also need to start paying National Insurance contributions every 3 months.

Unless you envisage earning more than £61,000 there is no obligation to register for VAT (which also means you don't need to add VAT to your invoices; and that's a big time-saver if you're working between EU Member States, each of which has a different VAT rate, or with the United States, which doesn't have VAT at all).

If you register as a limited company you pay a lot less tax but you do have to be VAT registered, and this means you have a lot of additional book-keeping and accounting to do, on a regular basis. You would probably need to pay an accountant, whereas if you're not a limited company it's possible (once you get the hang of it) to do your own book-keeping and your own annual tax returns.

It's a trade-off as to whether the additional admin hassle of being a limited company is costing you more than just being a self-employed person.

I don't think insurance is necessary.

This may all sound like a nightmare at the beginning, but after a year or two when you've set up your own routines to stay on top of it, it's not too bad.

There's quite a lot of helpful info on the Revenue and Customs website. But to get started on a good footing, for the first year or two I would highly recommend that you hire an accountant, who will deal with all the necessary registrations etc. and show you how to keep your books in order. Some accountants are absurdly expensive. I'd look for a small practice.

Thereafter, if you're comfortable with the monthly chores, you can start keeping your own accounts, and from time to time consult your accountant if anything comes up that requires clarification.



[Edited at 2009-01-02 11:47 GMT]


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Charlie Bavington  Identity Verified
Local time: 10:20
French to English
Previous thread Jan 2, 2009

http://www.proz.com/forum/business_issues/54180-set_up_as_a_sole_trader_or_as_a_company_in_the_uk.html

There may be others, I just remember that 'cos I posted more than once.

You are right that registering as self-employed is very straightforward - one phone call may well be enough.

Unless you work to a different calendar (which you can opt to do), it won't be after a "year-ish", it will be soon after 5th April, the end of the financial year.


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Simon Cole  Identity Verified
United Kingdom
Local time: 10:20
Member (2008)
French to English
VAT ? Jan 2, 2009

Happy New Year, Liz
Unless the paperwork has changed dramatically, a VAT return is fairly straightforward and isn't as complicated in the UK (when I did them up until 5 years ago) compared to here in France.
As for registering (or not), if you register then of course you charge VAT to your customers but they don't know what your turnover is. If you are not registered, then your turnover is less than the threshold. It doesn't matter to them if they have to pay it, because they claim it back by offsetting it against the VAT they charge their customers. Advice from an accountant in the UK at the time was that it was better to register at the start, because registering when your turnover reaches the threshold creates more hassle at a time when your business if obviously going well (and so you are busy), and because it may affect the way your clients perceive you and your business - see above. Sole traders have less "clout" than (perceived) bigger companies and may be the last to get paid. You don't need to form a company or other statutory business organisation in order to register for VAT.

Get an accountant - the fees will be more than paid for by the savings in tax that you will make. They can advise on things like how much (tax-deductible) money to pay into your private pension before the end of the tax year to benefit from the resulting reduction in income tax; how to offset the cost of your business assets (computer, etc) through depreciation in your accounts and balance sheet; how to claim for business mileage in your car; etc, etc.

Good luck, Simon


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Giovanni Guarnieri MITI, MIL  Identity Verified
United Kingdom
Local time: 10:20
Member (2004)
English to Italian
not entirely true... Jan 2, 2009

you can set up a limited company without having to register for VAT. It's compulsory to register for VAT only if you go above the threshold, otherwise it's voluntary...

G


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Charlie Bavington  Identity Verified
Local time: 10:20
French to English
oversimplification Jan 2, 2009

Simon Cole wrote:

As for registering (or not), if you register then of course you charge VAT to your customers .....

Not necessarily. It depends on where they are located and the type of customer they are.


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LizNickels
United Kingdom
Local time: 10:20
French to English
TOPIC STARTER
And now I have another stupid question! Jan 2, 2009

Thanks all. I shall definitely contact an accountant I think! I don't know if I will register for VAT because I will be part time for a while. I understand what you say, though, Simon, with regards to the status of a sole trader.

So if I don't register for VAT - that simply means I don't put "plus VAT" on my invoices? What does that do to my prices? Do most translaters quote for example E0.9 per word - their usual rate - plus VAT? Or should I quote something more with the understanding that it will initally cost the agency and customer less?

I'm glad there are some good people online to answer my somewhat tedious questions and that you are not all (still) comotose from your New Year celebrations.


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Tom in London
United Kingdom
Local time: 10:20
Member (2008)
Italian to English
VAT.... Jan 2, 2009

LizNickels wrote:

I don't know if I will register for VAT


Liz, every country has its own VAT rate, and can change the rate at any time. So if you set yourself up in the UK and add VAT to your invoices at the current UK rate of 15% (until 1 January 2010) I don't know what happens if you are invoicing a client based outside the UK where the VAT rate is different.

Not being VAT registered saves you that potential hassle. But it's one of the things you could discuss with your accountant.

....So if I don't register for VAT - that simply means I don't put "plus VAT" on my invoices? What does that do to my prices?


VAT is an *added* tax and has nothing to do with the price you charge for your work. You simply put "VAT not applicable" at the bottom of your invoices.

As for people who don't pay: in general they do pay, although sometimes they have to be chased. But I wouldn't see this as a major problem influencing the way you set yourself up in business.


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Charlie Bavington  Identity Verified
Local time: 10:20
French to English
No VAT Jan 2, 2009

Tom in London wrote:

Liz, every country has its own VAT rate, and can change the rate at any time. So if you set yourself up in the UK and add VAT to your invoices at the current UK rate of 15% (until 1 January 2010) I don't know what happens if you are invoicing a client based outside the UK where the VAT rate is different.

Assuming we are talking about translation, then even if you are registered for VAT, you don't charge it for business customers inside the EU but outside the UK.


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Anita Cassidy  Identity Verified
United Kingdom
Member (2005)
English to German
Charlie's right Jan 4, 2009

Charlie Bavington wrote:

Tom in London wrote:

Liz, every country has its own VAT rate, and can change the rate at any time. So if you set yourself up in the UK and add VAT to your invoices at the current UK rate of 15% (until 1 January 2010) I don't know what happens if you are invoicing a client based outside the UK where the VAT rate is different.

Assuming we are talking about translation, then even if you are registered for VAT, you don't charge it for business customers inside the EU but outside the UK.


I'm based in the UK, operate as a sole trader (i.e. I chose not to set up a limited company - not worth it) and am registered for VAT.

I add 15% VAT on my invoices to all customers in the UK (businesses and individuals) as well as individuals in other EU countries.
I do NOT charge VAT to business customers in the EU (outside the UK), but add a note on my invoice that UK VAT does not apply and that the recipient may be liable for local VAT.
Customers outside the UK/EU: no VAT.


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Michal Glowacki  Identity Verified
Poland
Local time: 11:20
Member (2010)
English to Polish
+ ...
A few new questions Apr 8, 2009

Hi there,

instead of posting a new topic, I'd like to ask just a few questions on being self-employed.
I've started (already some time ago) posting and mailing to different translation agencies my CV and proposal to do some work together. I have an MA almost in my hands and a BA in Translation and Interpreting. (some experience too, not much though)
Recently I have received 2-3 jobs (interpreting) and I need to accept them (according to the rule: take anything you can get your hands on), but the thing is: I need to register as self employed to pay tax, invoice etc, and here comes the question.. is it worth it? Even though I cannot be sure I will get any more jobs? Or it's better just to rejecet, finish off the studies and try to get my hands on some inhouse work? Orr..register as self employed, see what it looks like with the jobs and if it's not that good, terminate somehow and try any other option I can think of (with interpreting and/or translation)..Please help, I'm confused as what to do. In Poland that's not so problematic as I can always sign a contract just for the job.
Thanks in advance for any advice.


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Angela Dickson  Identity Verified
United Kingdom
Local time: 10:20
French to English
+ ...
Nothing to lose Apr 9, 2009

sapient wrote:

Hi there,

instead of posting a new topic, I'd like to ask just a few questions on being self-employed.
I've started (already some time ago) posting and mailing to different translation agencies my CV and proposal to do some work together. I have an MA almost in my hands and a BA in Translation and Interpreting. (some experience too, not much though)
Recently I have received 2-3 jobs (interpreting) and I need to accept them (according to the rule: take anything you can get your hands on), but the thing is: I need to register as self employed to pay tax, invoice etc, and here comes the question.. is it worth it? Even though I cannot be sure I will get any more jobs? Or it's better just to rejecet, finish off the studies and try to get my hands on some inhouse work? Orr..register as self employed, see what it looks like with the jobs and if it's not that good, terminate somehow and try any other option I can think of (with interpreting and/or translation)..Please help, I'm confused as what to do. In Poland that's not so problematic as I can always sign a contract just for the job.
Thanks in advance for any advice.


Hello sapient,

You won't lose anything by registering as self-employed, except you will have to start paying the basic rate of National Insurance, which is about £2 a week, unless you fill in a form stating you will have low earnings this year. It could in fact be very beneficial to register, as you can claim the cost of materials related to your business as tax-deductible expenses. Have you been buying translation software? Computer equipment? Pens? As you are still studying, you will probably end up paying very little or no tax for this year, and you will be able to accumulate some experience, both in translation and interpreting, and in dealing with the tax authorities.

Good luck!


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