The self-employed sector contributed an estimated £278 billion to the UK economy in 2022, with £126 billion of that contribution coming from highly skilled freelancers. If you are thinking about joining their ranks, you may be wondering how to become self-employed in the UK. While there’s no short, sweet answer to the question, it’s not as complicated as some of the would-be self-employed have been led to believe.

Pros and cons of being self-employed

Before getting into the ins and outs of how to become self-employed, it’s important to consider the pros and cons of working for yourself before making any big decisions. 

Some of the pros include being your own boss, enjoying the satisfaction of building and growing your own business, working flexible hours, and enjoying a better work-life balance. Other pros include the freedom to make business decisions, working in a profession you feel passionate about, and being responsible for hiring additional workers.

Being self-employed is not without a few cons. Some of them include potentially high initial costs, greater risk for you as an individual, losing money when you take days off, and a significantly higher workload. Other cons include being responsible for firing people and doing your own bookkeeping.

Weigh up the pros and cons before making a firm decision about whether to start working for yourself or to remain in full-time employment.

Becoming self-employed in the UK

There are several steps to follow when looking at how to become self-employed in the UK.

1. Consider different types of self-employment

Some types of self-employment are more intensive yet potentially more rewarding than others, while others have less initial risk. Think about which type of self-employment would suit you best.

Freelancers usually are paid a set hourly rate for doing work outsourced by individuals or companies. Consultants are similar to freelancers, although they tend to be far more specialised and earn more money. Becoming an entrepreneur by opening a small business such as a café, a fitness studio, or a hairdressing salon is another type of self-employment. If you have the right qualifications, you could become a skilled craftsperson known as a sole trader, such as an electrician, plumber, gardener, or decorator. Other types of self-employment include launching a start-up and becoming a partner in an existing business.

2. Think about financing options

Financing is part and parcel of how to become self-employed, whether your initial expenses are large or small. Think about how you will meet your initial financial obligations. Possible funding sources include your existing income if you’re still working, your savings, a business loan, and crowdfunding.

3. Create a business plan

Once you’ve thought about the pros, cons, and types of freelance work as well as funding options, you should create a well-defined, realistic business plan. Define your product or service, and who you want to offer it to (your niche). While not set in stone, your business plan acts as a general roadmap or guide as you embark on your journey toward self-employment.

4. Plan your finances

You will already have considered your funding options as part of the initial steps of how to become self-employed in the UK. At this stage, you should think about how you will manage your finances. One of the easiest ways to do this is to manage your money online, for example a business account with Moneycorp.

5. Name, register, and insure your business

Choose a name for your business and then register it under that name. There are various rules regarding business names in the UK, so ensure you familiarise yourself with them before deciding on a name. Ensure that you insure your business, as a claim against it could end up being a financial disaster.

6. Draw up a marketing plan

Think about how you will advertise your offering. Draw up a comprehensive marketing plan that includes a variety of strategies to spread the word about your product or services. These strategies can be a simple as using word of mouth and social media platforms, to more complex approaches such as placing Google Ads and running ad campaigns on YouTube.

7. Pay self-employment tax

Once you are up and running, make sure you comply with government requirements for your business by filing the appropriate taxes with HM Revenue and Customs (HMRC). As a self-employed person, you are responsible for filing and paying your own income tax. The amount of money you need to pay depends on how much you’ve made through self-employment, although you can deduct all business-related expenses when calculating your taxable profit.

Sign up for a sole trader account with Moneycorp

When you’ve gone from how to become self-employed to actually offering your product or services to foreign clients, you might find that getting paid can be one of the biggest challenges you face. Traditional methods such as receiving foreign payments via your local bank or a platform such as PayPal can be expensive enough to eat into your profits. Instead, you need a solution that is cost-effective, fast, and secure. Sign up for a sole trader account with Moneycorp and receive and make secure international payments in a large number of currencies, convert and withdraw funds, and choose from our range of FX tools.