How to become self-employed

Managing your finances is an essential part of successful self-employment. Working for yourself, you are really just running a micro-business, with revenues and expenses, one that aims to generate the money you need to live on.

Financial management

You should have up-to-date information and record-keeping in a simple spreadsheet:

• Update it regularly with business expenses and income.
• Include all the money you need to spend in order to deliver your product or service.
• Add any regular payments like software subscriptions, internet, etc.
• Use it to make financial projections by estimating future earnings and expenses.

Your cash flow - the money you estimate your business will have in the bank at the end of each month - helps give you advance warning of potential financial ups and downs, so you can anticipate when you need to spend less and/or go out and find more work/sales.

Budgeting

It’s important to be realistic about your personal financial needs, like, rent, food and travel; make sure your business activities can generate enough money for you to live on. It’s not unusual to need to support your self-employment with part-time work in the early stages.

Funding and investment

It’s always preferable if you can get started without needing to find investment or funding, because looking for it can take up a lot of your time and energy and distract from your work.

Sometimes you might need to pay for materials or production ‘upfront’, consider:

• friends and family
• banks
• private investors
• charities, funds and foundations
• your own savings
• events and Crowdfunding campaigns.

Having your own workspace can be a substantial expense, especially when you’re getting started, so think carefully about whether you really need it.

It might be impractical to work from home if there’s not enough space, privacy or quiet. If you do decide you need a separate space to work in, consider:

• An affordable monthly budget for rent
• A good location that’s a manageable travelling distance/time from home
• The type of space you need; studio, office, workshop etc.

If it’s too much of a commitment, financially and legally, to rent your own space; a subscription to a coworking space or network of spaces might be better. Think about:

• What workspace facilities (PDF 663KB) it needs to have; floor area, light, power, heating, shower etc
• Whether you want to be close to other creative practitioners/small businesses
• If you want to be in the same building (like a studio complex) as colleagues, or in a broader neighbourhood with other creative businesses.
• How near it is to printers, fabricators, manufacturers, studios, favourite cafés etc.

There are different ways to find suitable space, including:

• Walking the area you want to work; look for studio, office or workshop complexes
• Looking for unusual buildings and spaces and asking who owns, rents or runs them
• Searching online on studio/workshop platforms like London-wide Space Studios.
• If you are a BA Fine Art graduate, you can use the Associate Studio Programme to find subsidised studio space.

There are also ‘meanwhile’ spaces in buildings that are offered to artists/creatives - relatively cheaply - for a limited time by organisations like Hotel Elephant (south London) or Hypha Studios (nationwide).

Tax

Tax for self-employed people is mostly simple and straightforward, which is one of the reasons that many people go for this option. Dealing with tax becomes a bit more complicated and expensive if you set up a limited company.

Tax is managed by the Inland Revenue - the UK government’s tax department. If you are self-employed, the process of telling the government what you earned, what you spent in your professional activities and what tax you owe is automated. You will need to complete and submit a tax return, which is easy to do online. The Inland Revenue provides plenty of online guidance and assistance.

Alternatively, you can pay an accountant to file your tax return for you. It’s a good idea to choose a smaller firm or individual that knows how creative businesses work and is more affordable. Starting out, you should expect to pay around a couple of hundred pounds a year.

The key is to keep good records - month by month, not at the end of the year:

• Keep a record of invoices you issue, how much they are for and when you receive the money.
• Document everything you buy or pay related to your business activities. That includes everything from bus fares to laptops, printers to pattern cutters.
• Set up a simple spreadsheet and add items to it regularly rather than waiting until year-end when your tax return is due.

Insurance

Insure any expensive equipment you use for work, like cameras or musical instruments.

It’s also a good idea to have public liability insurance (search for quotes on comparison sites such as Money Supermarket and Compare the market), which insures you for claims made against you by a client or member of the public who believes they’ve been injured, or their property damaged, by your business activities. Some organisations will only do business with you, or rent space to you, if you have public liability insurance.

There are other kinds of business insurance like employer's liability insurance, which you must have if you employ other people. What type you need is dependent on the type of business you are in.