Is it worth being self-employed in the UK?

Many people aspire to become their own boss, but the one question that always crops up when dreaming up new business ventures is this: is it worth being self-employed in the UK? Starting a business and becoming your own boss sounds like a dream come true to many budding entrepreneurs; however, it’s worth noting that there are some significant differences between being on an employer’s payroll and being self-employed.

Today, as someone who has been successfully self-employed for over 11 years, I’m taking a deep dive into the world of self-employment in the UK. If you’re considering starting a side-hustle, quitting your job to become full-time self-employed, or wondering whether you can boost your income alongside your PAYE job, this is the blog post for you.

How to start your self-employment journey

To answer, Is it worth being self-employed in the UK?, we first need to look into several important factors.

Before registering as self-employed, you need to have a fairly comprehensive idea of what you plan to do and where your income will come from. You will need to work out your business plan, come up with an innovative and memorable name for your brand, and finally, register your business with HMRC.

There are a variety of categories that self-employed people fit into, and the type of business you want to start with helps you determine the best category for you. Self-employment encompasses various business structures and roles, including freelancers, independent contractors, sole proprietors, and partnerships. Each structure has its own legal and tax implications.

Today, I am discussing the pros and cons of being self-employed in the UK and answering some of the most frequently asked questions about self-employment. Keep reading to find out more about:

Having a full-time job and also being self-employed
Registering as self-employed
The potential benefits that self-employed people could be entitled to
Understanding self-employment tax reliefs and expenses
The pros and cons of self-employment in the UK
Other vital considerations to take on board before becoming self-employed

Let’s get started!

Can you have a full-time job and also be self-employed?

One question that crops up a lot when people start to dream of becoming their own boss is, Can I have a full-time job and also be self-employed? Generally speaking, your employer cannot stop you from performing freelance work outside of your contracted hours, however, they may have stipulations in place that prevent you from pursuing particular fields of work.

Examples of this could include freelance work that conflicts with your employer’s business or work that involves you using company resources. When considering the query, Can my employer stop me from doing freelance work? It’s important to remember that, legally, no UK law prevents employees from also being self-employed or freelancing, but despite that, some issues could arise if:

There are contractual restrictions that prevent or require permission for freelance work.
There’s a conflict of interest because your new business venture is in the same industry as your employer or with the same clients.
Your employer has concerns about your ability to perform your duties effectively if you’re also pursuing a self-employed career.

If you are unsure whether becoming self-employed alongside working a full-time job will cause you issues at work, it’s best practice to seek advice from your employer or HR department.

Do I have to register as self-employed?

The next step in your self-employment journey in the UK is to register your business with HMRC. It’s best practice to register as self-employed in the UK as soon as you start your business. To be considered self-employed in the UK, you need to earn over £1,000 annually; however, even if you haven’t reached this milestone yet, registering your business is still a good idea. After all, you’re definitely going to be aiming to make more than £1,000 annually as your business grows.

To be considered self-employed in the UK, you typically need to meet the following criteria:

You decide when you work, for how long, and how often.
You are earning money and have multiple customers/clients.
You are the owner or partner in the business
You provide your own equipment, pay for your own essential subscriptions, etc

To find out more about the self-employment criteria, you can visit the HMRC website’s Working For Yourself page.

You may be wondering how much money you need to earn when self-employed before you have to pay tax. In the UK, self-employed people have a Personal Allowance of £12,570* – after exceeding this amount in revenue, you must start paying tax.

*At the time of posting.

What benefits can I get when self-employed?

For many, becoming self-employed is as much about accessibility to work as it is about having freedom over your schedule. In the UK, millions of people want to access work, but for various reasons, they’re unable to attend on-location jobs.

Numerous factors can keep people out of traditional jobs, many of them are health-related. Whether it’s a disability or a struggle with mental health, it can be demoralising when you’re desperately seeking work, but unable to find a suitable role for yourself.

Self-Employment in the UK and PIP

For those reasons, I sometimes get asked the question, Can I get PIP when self-employed? Personal Independence Payment, commonly known as PIP, is a government benefit that can help with living costs for those who suffer from a long-term physical or mental health condition or disability, or have difficulty doing certain everyday tasks or getting around because of their condition.

PIP is not a means-tested benefit, so it doesn’t matter how much money you have when applying. If you are entitled to PIP, you will still be able to receive your cost-of-living payments when self-employed.

However, it’s worth noting that the type of work you take on as a self-employed person could affect your total PIP allowance. This is because PIP is based on your daily living activities and your mobility, so working may suggest that you’re able to achieve things that you were previously not able to during your PIP application.

Other potential benefits for the Self-Employed

PIP isn’t the only government benefit self-employed people may be entitled to. Some people may also be eligible for Universal Credit, Employment and Support Allowance, and even Maternity Allowance.

Each benefit has an individual eligibility criteria that you must meet in order to claim. For more information on PIP payments, as well as other benefits that may be available to you as a self-employed person, visit the Scope website.

Self-Employment tax reliefs and expenses

As you now know, if you are earning over £1000 per year, you legally need to be registered as self-employed with the HMRC. When it comes to keeping on top of your own taxes, there’s certainly a bit of a learning curve. However, with that being said, it’s not all doom and gloom – there are quite a few items and services that you can expense that you may not have even thought about!

The type of expenses and tax deductions you can include on your self-assessment depends entirely on the type of work you do. As an example, I work from home. This means that I don’t need to pay for uniforms or travel costs, however, I do pay for things like my office space, heating, and the internet. The HMRC has a really handy guide on how to claim expenses when self-employed and includes examples and guidance on how to claim for services when you work from home.

If you’re planning on starting up a business where you’ll be working from home, like me, here are just a few examples of things that you can claim as an expense when completing your self-assessment:

Heating
Electricity
Council Tax
Mortgage interest or rent
Internet and telephone use
Essential subscriptions and services

You’ll need to find a reasonable method of dividing your costs, for example, by the number of rooms you use for business or the amount of time you spend working from home. After all, the cost of heating your office for 8 hours a day will be much less than the total cost of heating your whole house for 8 hours a day.

Keep in mind that when recording your income and expenses for your self-assessment, you will need to retain proof of all the purchases and services you’ve used and paid for. This is imperative, as you may be asked to provide evidence of your expenses at any time.

The pros and cons of self-employment

Finally, we come to the juicy bit of self-employment: the pros and cons! If you’re contemplating making the leap into self-employment, this is the section of the article that will either make or break your business venture. As with any job role or title, there are both pros and cons that can contribute to the overall enjoyment and success of the job. Here, I have listed just a handful of what I consider to be the most significant factors that should be carefully considered before applying to become self-employed.

Pros of self-employment

Here are just a few of the good bits of being self-employed – the things that I absolutely love about working for myself!

Freedom of hours – as a mum, I find the freedom of hours to be absolutely game-changing. I can attend school functions, go on days out, or socialise at school events without worrying about my workload.
Creative freedom – taking your business in the direction that you want to go in is also a fantastic feeling. You can how you wish to market yourself, the tone and voice your written/social media content conveys, and much more.
The potential to earn more – being self-employed gives you the opportunity to earn significantly more money per hour/per task than traditional work does.
Learn a whole new skill set – one of the best pros to be self-employed is all the new skills that you learn along the way, from accounting to advertising and everything in between.
Work from home or on the move – being self-employed gives you the freedom to work from anywhere in the world. Want to go on holiday? No worries, take your work with you. Heading on a long train journey? Not a problem. Fancy working in bed or on the sofa instead of at your desk? The world is your oyster!

Cons of self-employment

Unfortunately, along with every positive aspect of making a big decision, there are also some negatives to consider. This is especially true for those looking to become self-employed.

No sick pay, holiday pay etc – if you find yourself too sick to work, you seriously injure yourself, or you want to take a two-week holiday without working, you will lose out on paid work opportunities.
No employment benefits such as pension contributions – when you become self-employed, you are responsible for paying into your own pension, paying NI tax, and looking after yourself and your business. There are no special employment benefits like private dentistry or healthcare – this all falls on you to cover.
Increased workload handling finances, admin, creative tasks etc – although learning a new skillset is exciting and handy, it also takes a lot of time. In a traditional job, you can send invoices off to the finance team or let the HR team deal with difficult situations, however, when you’re self-employed, you have to take on the responsibilities that traditional workplaces have specific, focused teams to deal with.
Competition and undercut pricing from others – a depressing, yet very common issue that self-employed people face is being undercut by competitors. This can be disheartening and affect morale, finances, and your business’s reputation.
Stress of workload and the possibility of your business failing – when everything falls on your shoulders, it can put individuals under an enormous amount of stress!
Financial instability – the biggest thing I miss about working in a traditional setting is the guaranteed pay packet at the end of each month. As a self-employed copywriter and VA, it can be very stressful not knowing exactly how much money I will make each month.

Other factors to consider before becoming self-employed

Spending money to make money

Setting up a business typically requires you to spend money to make money. When you first start as self-employed, you will likely need to make several investments before you can start to turn a good profit. This could include several things, including advertising, equipment, outsourcing, and insurance.

Less personal time

You’ll probably find that you have less personal time as you concentrate on growing your business. This means that you may have less free time to spend with your family or dedicate to your favourite hobbies.

Having a “Plan B”

It’s not about planning for your own failure; it’s about making sure you have a clear backup plan, just in case things don’t go the way you’d hope.

Are you motivated enough?

To become successfully self-employed, you need to be motivated and have an iron work ethic. If you don’t have the willpower or motivation to go all-in with your business plan, there’s a possibility that things might not work out the way you want them to.

Is it worth being self-employed in the UK?

Yes, it is definitely worth being self-employed in the UK if you have the motivation and discipline to dedicate to your business. If you have an excellent business plan, the willingness and drive needed to create something from scratch, and the willpower and dedication needed to grow and expand your business as needed, you can 100% make self-employment work for you.

Just be sure to take into account any essential investments you may need to make, keep a track of all your incomings and outgoings, and be sure to legally cover your business with insurance if required.