Self employment has its benefits. For many, there are financial benefits to opting to work for yourself instead of an employer. Some of these benefits will depend on the amount of hours that you work and other factors in your home but here are some of the ways that you gain financially.
Government Benefits to Top Up Income
Income for a self employed person is not stable. One week you could earn enough to survive and another week you may not earn anything. Because of this, those who are self employed could gain some of the government benefits available, including Working Tax Credit, Child Tax Credit and Housing Benefit.
These benefits will depend on the amount of hours that you work and the amount that you earn. For example, those who are self-employed part-time could find that they are entitled to Job Seekers Allowance. Those who work over 24 hours per week but are on a low income could benefit from Working Tax and Child Tax Credits; the latter if they have children.
Calculating Hours Worked Helps Financial Gain
To gain some of the government benefits you will need to determine the number of hours that you work during the week. Unlike for normal
employment, this is not just the amount of time that you spend doing your job. You will also need to factor in the amount of time it takes you to do your accounts, the time spent finding new clients or customers and marketing your business. This can help to increase the amount of hours you work considerably.
Claiming Taxable Deductions
Anything that you buy for your business can be deducted from your profit. Anything that is designed to last less than two years is classed as an
allowable expense. This is taken straight from your profits so you end up paying less tax during the year. You will need to keep all receipts or proof of purchase in case you are audited by HMRC at a later date, which could happen at any time during a six year period.
Capital allowances are for items that are designed to last for more than a two year period such as a car, machinery or a new computer. This is not taken from the profit but a depreciation value is each year. Again, you will need to keep all receipts as proof of purchase should you be audited at any point.
By claiming the taxable deductions, you will end up paying less tax and so keep more money in your pocket. This is for anything that is for business purpose including business suits, petrol for business meetings and even monthly subscriptions that you use for business. Anything that is joint business and private use you can claim the percentage of the cost for the business side.
Improve Your Salary
One of the major positives of working for yourself is that you can improve your salary. When you work for a boss, he will dictate the amount that
you earn each month and whether you are paid for your overtime. By working for yourself, you are paid for every hour that you work and there is no cap on your earnings. However, you do need to take the risk that you will not earn every week and you will not be paid for your time off, like you are in employment.
You do have more control over how the profits are spent in the business though. You can choose to give yourself a larger salary instead of
putting more money into the business but you will pay tax on this. You can also determine the budget for different areas of the business to help improve the profits and your income each year.
Working self employed offers many benefits, especially financial. There is the ability to earn much more than you ever would in full-time employment since there is not the cap on your earnings. You will be paid for every hour that you work and you can determine the amount you sell your products or services for. While it can take time to startup, you will be able to gain some of the government benefits available. You have more control over the amount of hours that you work, which helps to meet the criteria for some of the low income benefits should you need them. At the same time, you will work for yourself and have control over the business as a whole; not just your earnings.
Stephanie has written many corporate related articles for Real Business Rescue. Over the past year she has written topics relating to business insolvency and company closure as well as well as a wide spread of information relating to corporate insolvency. Real Business Rescue are business insolvency experts who offer free advice and support to company directors who face financial distress.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.