For a long time, you may have had the dream of starting your own business but feel you still need the security of your employed position. Not to fear, many people find that starting a business while working at their current job was an excellent way into running their own business. Hopefully, in time, you will be able to stop your employed role and become fully self-employed, but by starting part time you can reduce the financial risk.
However, a word of caution, please ensure you check your contract of employment doesn’t prohibit you from starting a business while working for them. This could be because there could be a conflict of interest even if not in direct competition. Ensure you check clauses in your contract of employment where your current employer may have a claim to any intellectual copyright. If you have a good relationship with your current employer discuss your idea with them. They may allow you to reduce your working hours as the business builds, they could even become clients or suppliers to your business in the future. Always try to work in collaboration, you never know where it will lead.
You will of course have to register with HMRC as self employed no matter how small the business is. However, ensure you analyse the potential success of your business prior to registering, market research is vital, once you have set things up and you are confident you will generate income, you need to register as self employed. You may decide to become a Limited Company and you would then need to register with Companies House. We strongly suggest you speak to an Enterprise Agency such as BSYNY to help with these decisions.
Of course, you will now need to complete a self-assessment form annually. This will need to include all your income from your salary, any benefits you may be in receipt of as well as the income from your business. You can also offset start up costs against your salary.
As an employee you will pay Class1 NIC on your wages. Currently as a sole trader you will pay Class 2 NIC at the prevailing rate and Class 4 NIC based on the business profits.
If you're conducting research and development, you might qualify for a tax relief.
All businesses, irrelevant of size must adhere to the tax rules, if you are uncertain always seek professional advice.
http://www.employedandselfemployed.co.uk/ is a website that has a tax calculator so you can see the implications on taxation and NI being employed and self-employed.
When starting a business while working, time management is going to be vital and you will need a lot of self-discipline to handle double the workload. You should explain to family and friends that you are going to be busier than usual for a time, but it is important to be kind to yourself and make sure you get enough rest. Focus on critical tasks and learn the art of delegation for those non-critical tasks. Priority management is just as important as time management.
You may also be classed as self-employed even if you believe it is just a "hobby", HMRC call this "profit seeking motive" business. Although you might not consider yourself to be in business, if HMRC think that you are then you could owe money on your self-assessment tax returns at the very least, and in the worst case, you could be facing fines for overdue returns and tax to pay. But if you do register, then best case could be that you get some tax back if you are also employed and have had some expenditure to start the business.
Of course, just because this is a part time business does not mean to say all other elements can be ignored, so as well as the tax implications, you will need to consider any legislation you need to follow i.e. food hygiene, licences, insurance (public liability, product liability, employer's liability to name but a few), bookkeeping and ensuring your records are kept accurately, employment legislation and of course Health & Safety. Sorry, all the regulations and compliances still apply to you!
Seeking the appropriate advice when starting a business while working is key to your success. We would always suggest seeking advice from an Enterprise Agency such as BSYNY to give you guidance from the outset. They can help you out with all your business questions while you get your business up and running, and we have lots of useful articles, eBooks and other resources on our website too.