5 mistakes to avoid when starting self employment
Mixing personal and business banking
Keep a separate bank account for the trade and don’t spend personal transactions from there. Instead transfer some of your profit to your personal account.
Not being organised with receipts and expenses
Keep everything. Better yet get a good bookkeeping system like Free Agent or Xero. Attach pictures of the receipts and attach them to the bank transactions. Then you can forget about them.
Setting prices too low
Look at the market and see what similar services are being charged at. If you try and undercut you’re going to either skimp on materials and quality or if you aren’t paying yourself enough then you won’t have the space to grow if you’re stressed you don’t have enough money. Make sure you have enough margin built in to sustain you.
Not skimming money for tax bills
Each month skim 20-30% off your sales into a savings pot or account. Then when self assessment comes around you’ll be ready.
Not understanding the VAT threshold
You’ll be surprised how quickly sales can reach the VAT threshold. This is calculated in a rolling 12 month period (not tax year). If you have two people working in the trade you’re likely going to hit it in order to afford to pay two people. Even if what you sell is zero rated you still need to register for VAT. If you have an eye on where you are you can plan whats going to happen if you reach it and need to cover a 20% tax on sales.
