Regulations and the legal side of being of being self-employed
Quick links to sub topics
- Different ways of trading
- Registering that you’ve started work
- Sorting out where to work from
- Insurance
- Health & safety
- Data protection
- Intellectual property
- Tax
- Handling money
This is the part where it’s really tempting to switch off but one of the things about being self-employed is that everything is down to you. So, if you don’t get to grips with the regulations and laws to do with being self-employed then no one will and it won’t take long for you to end up in trouble – serious trouble.
One of the first things you need to do is decide how you’re going to trade. You’ll also hear this referred to as the legal structure of your business. It’s a very good idea to get advice before choosing what you’re going to do but, briefly, the different structures are:
- Sole trader. This means you work alone and is the simplest way of becoming self-employed.
- Partnership. This is for people setting up in business with someone else.
- Limited company. This is where you actually set up a company so it is more complex than the two above and does involve some costs.
You can also be self-employed by:
- Operating a franchise. This allows you to run a branch of a business that has been set up by someone else.
- Participating in a co-operative. This is where the people working in a business own and control it together.
The Prince’s Trust website - has a very good guide called Forming your business, which explains trading structures, what you need to do for each and their pros and cons. (The local Prince’s Trust contact can print this and pop a copy in the post if you are not able to download from an Internet site. Please see our Further resources section for more details.)
Registering that you’ve started work
Anyone can work for himself or herself but you’ll be doing it illegally unless you register with HM Revenue & Customs, known to most of us as the taxman. You have to do this within three months of starting work but it is simple and once you’ve done it you’ll be sent a guide setting out what else you need to do to stay on the right side of the law, for example pay tax and National Insurance. You’ll find out more about these in our section on Handling money.
To register as self-employed, you need to fill in the form found at the back of the leaflet SE1 – Thinking of Working for yourself. It is available to download from the HM Revenue & Customs website – or you can call the helpline for newly self-employed people on 08459 15 45 15.
If you’re starting a limited company, you have to register with Companies House. For more information, call the Companies House Contact Centre on 0870 33 33 636 or visit the Companies House website. You can also use this website to check that the company name you have chosen isn’t already being used by someone else.
Claiming benefits
If you are claiming benefits when you start working for yourself, it is essential that you keep your Jobcentre Plus Advisor up to date with what you are doing. You may be able to keep some benefits but as you start to earn money others may stop. If you aren’t claiming anything then it’s a good idea to check if there are any benefits available to you. For example if you become self-employed via New Deal, you should be able to claim benefits as well as a New Deal allowance in the early days. For more information on New Deal see our Further resources section.
Getting the right paperwork
As well as registering with the taxman, it’s important to check that you don’t need a licence or any special papers for the work you’ve chosen to do. Things like working with children, selling food and alcohol do require licences. Your local authority is the place to go for these and you’ll need to have all the paperwork sorted before you start. You can search for the details of your local authority at www.direct.gov.uk.
Sorting out where to work from
Where you work from really depends on what you do. If you’re driving a cab or selling ice cream you’ll be out on the road, while designing web pages or taking in other people’s ironing is something you can easily do from home. There are some things you’re not allowed to do from home, such as really noisy jobs. To find out more, contact your local authority. For other work, it would be impractical to use your home so you may have to rent somewhere or even buy. If you’re planning to start something like a shop, café or laundrette, then you’ve also got to think really carefully about where it is or you may end up with no customers. The Prince’s Trust has a good guide called Finding premises which you can download from the Princes Trust website (or talk to your regional office – ring 0800 842 842 for details).
Business rates
If you’re working out of a shop, office, factory or warehouse, it’s likely you’ll have to pay business rates to your local authority. Business Link has more information on this and you can contact your local authority too.
People and businesses take out insurance to protect themselves financially in case something goes wrong. It’s important to find out a bit about insurance before you start work because you may find there are some insurances that the law says you have to take out. For example, if you’re employing someone else you have to take out employer’s liability insurance. There are also other insurances that you might decide you should have such as contents insurance, which offers protection if something like your computer gets stolen or damaged.
Unfortunately, ex-offenders with unspent convictions can have a really hard time getting insurance of any kind. It is an offence not to disclose unspent convictions, even if you’re not asked to and, once you’ve disclosed them, it’s likely you’ll get a firm ‘No’ in response to your application for insurance. Organisations such as NACRO, SOVA and UNLOCK may be able to help (you’ll find their details in our Further resources section) and your resettlement department or probation office will be able to give you the contact details for insurance companies that offer ex-offenders insurance.
If you’d like to find out more about insurance, visit the Let’s Talk About Money website.
Health and safety are two words we tend to hear more and more often these days and they can have a big impact on any work we decide to do so it’s a good idea to get familiar with what they mean as soon as you start developing your work idea.
Health and safety is all about making sure you and other people don’t get hurt or become ill because of your work. This isn’t just people who work for you but anyone who visits where you work or comes into contact with the products or services you offer.
With health and safety there are some things that it’s sensible to do, such as having a first aid kit at home if you’re working there and making sure your computer wires don’t trail across the floor so you trip over them. And, depending on the work you do, there are also things that the law says you have to do. For example, you can’t work with poisonous chemicals without being very careful.
You can find out more about health and safety from: www.safestartup.org or the Health and Safety Commission (advice line: 0845 345 0055) – or your local authority.
You may well remember stories in the news about the government losing personal information on people.Well, if the work you’re planning to do involves keeping information on people – for example customer names and addresses – then there’s a law called the Data Protection Act of 1998 that says it’s your responsibility to look after this information. To find out more about data protection, contact the Information Commissioner’s Office helpline on: 08456 30 60 60 (9 a.m. – 5 p.m. weekdays) or talk to your local Business Link office.
You may also need to know about intellectual property when you become self-employed.What we mean when we talk about intellectual property is things that belong to you but that aren’t an actual physical thing that you can touch. Examples of intellectual property are inventions, writing, pictures and computer programs. You can use the law to protect these so that other people can’t just go copying your ideas. Likewise, you can’t set up in business using other people’s ideas. Intellectual property is complicated so it’s an area that you should get advice on if you think it applies to you.
The UK Intellectual Property
Office is a good place to start.
Its central enquiries number is
0845 9 500 505 and web
address is www.ipo.gov.uk.
There’s no getting away from the thorny issue of tax, which is the money we pay to the government so that it has the funds to spend on things like schools, hospitals and building new roads.We all have to pay tax, even if we don’t agree with what the government is doing with our money.When you’re self-employed it is your responsibility to tell the taxman how much you have earned.
Our section above on registering as self-employed explains about registering with HM Revenue & Customs, which is the part of the government that collects tax from us. To find out more about the taxes you need to pay, see our section below ‘Handling money’.
If you’d like to learn more about taxes in general, the Let’s Talk About Money website has more information.
It’s very difficult to run a business of any size if you can’t handle money because it plays a part in pretty much every area of a business. You’ll need some money behind you to get your business up and running, for example to pay for equipment, premises or advertising. You’ll have to decide how much to charge for whatever it is you’re doing, you may need to pay other people, there’ll be bills to pay and you’ll certainly need to save enough to pay your taxes. Then there’s the money you’ll need to keep you afloat while you’re earning more money!
There’s no getting away from the fact that money – or finance as it’s more commonly known in the business world – is complicated and it’s one of the main reasons that new businesses fail, even if the idea behind the business is fantastic. But don’t let money scare you off because if you take the time to understand it and grab all the help available to you, you’ll be in a good position to succeed. It’s also well worth doing a short course covering the basics of business finance. Organisations such as Business Link, Careers Advice, Jobcentre Plus and Citizens Advice should be able to point you in the right direction. You’ll find their details in our Further resources.
