Setting up your own business

Running your own business can be fulfilling and life enhancing. Instead of having someone telling you what to do, you’ll be the one making the calls – choosing how and when you work and who you do it for.

But this is also why it’s essential to take a step back before you start. Your work/life balance could change significantly, particularly if you work from home, as this can make it hard to ‘walk away’ in the evening. You could also find that there’s more stress, as you’re now responsible for everything.

Take the time to make plans that include your loved ones and friends. You want to be certain you can keep them in your life – and you could well find that their support will help you be more successful

In time, you’ll hopefully be earning enough from your business to live on (or, ideally, a lot more than enough). However, unless you have a contract role lined up or have customers already waiting, it’s likely that the early days will be tougher. Having money put aside to tide you over could make all the difference.

If you’re currently employed and thinking about working for yourself, this is good reason not to jump ship straight away. Taking a bit of time to build up your savings could make a huge difference in a year or two – and if your new business doesn’t conflict with your current job, you could even test the water by starting it in your spare time.

If you already know all about the industry or sector you’re planning to operate in, you can probably skip this section and move on. For everyone else, it’s worth doing a bit of research. Here are a few of the questions you might like to answer.

Who are your potential customers? What are they looking for? How will they find you? What do your competitors offer and (if you can find out) what do they charge? What will you charge and how much profit will this give you after your costs are taken into account?

If you’re hoping to set up a small business that will, in time, become a big one, you need a business plan. Your bank may want to see it and potential investors certainly will – not to mention employees down the line. For those who want to be a one-man-band, it’s not as important, but having some ideas on paper can still help you stay on track.

The Government has some guidance to help you do this and there’s lots more information out there – provided by everyone from trade bodies to banks.

You can change your mind later, of course, but before you begin, you’ll need to decide how you want to operate. The most common options are to be a sole trader or a limited company. (There are also structures such as partnerships, but if these are right for you, it’s likely you already know.)

It’s a big decision, so it’s worth doing your own research, but here’s a quick overview to get you started. Sole traders have the advantage of less paperwork and a more straightforward tax return, but if your business loses money, you will have to pay the debts yourself. With limited companies, the debts belong to the company and aren’t passed to the directors (so your own savings are protected). In some situations, you may also pay less tax on the same amount of profit. However, there’s more paperwork and greater reporting requirements.

We’ve already mentioned paperwork once, but when it comes to setting up a business there’s a lot of it to do. For a start, limited companies have to register with Companies House. It doesn’t take long or cost very much, but it is essential. Both sole traders and limited companies also have to let HMRC know.

If you’re using a limited company, you’ll need a business bank account. Sole traders can use personal accounts if they are trading under their own names, but it may still be worth getting a business one.

You’ll have to check your current insurance, particularly if you’re working from home, and you may want to set up business insurance – or, in some cases, you’ll be required to.

There’s a lot more to consider – far more than we can cover here – but the Government has guidance to help. Here’s their support for limited companies. And this is their page for sole traders.

Finally, if you’re going to handle or store personal information, you need to know about GDPR and its requirements. This guide from the Information Commissioner’s Office may help you get started.

Once you’ve got your business up and running, there’s one more important financial consideration to remember – your pension. It’s easy for the self-employed to skip this option, as there’s no pressure to do it and, in the immediate term, it’s one less outgoing. However, most people don’t set up a company with the intention of giving it up after a few years, so your personal financial planning needs to be as long term as your business planning.

To help you we’ve developed specific guidance. Our Self-Invested Personal Pension (SIPP) is also very easy to use if you’re self-employed, as you aren’t committed to making contributions at any point. You can put money in when you want and you can pick investments that suit your personal situation. We have lots to choose from, so you have a good chance of finding what you need, plus we have free guidance and investment selection tools to help with the decisions.

When you put your savings into pensions, your money is locked away until you are 55 (57 from 2028). If you need a bit more flexibility, you could put some of your retirement savings into our Stocks and Shares ISA. You just need to be certain that you are disciplined enough not to dip into your savings unless you really have to.

With our ISA you can take your money out whenever you want and you get the same fund range, guidance and investment selection tools as our SIPP. There are also some helpful tax benefits.

Whether you’re thinking about sending the kids to university, starting your own business or enjoying the retirement you deserve, we're here to help you tie it all together – before, during and after.

That’s why our experts have explored the opportunities and implications of a range of life events.

We'll help you make balanced decisions, so you can live your life with confidence. Because we understand that money is the means, not the end.

Planning for the future means planning for the rough as well as the smooth. We want to be with you for the happy times and through life’s rockier patches.

Our guidance is designed to help you make the best decisions for your specific needs and situation.

With nearly 50 years of innovation and industry leadership, we can do a lot to support you, whatever you want to achieve and whatever the future holds.

There are many moments in life that are worth saving for. Some you might already be planning, while others can come as a nice surprise. This might include starting your own business, buying a house, getting married or supporting your children. Whatever you hope that your ‘one day’ holds, you could help make it happen by putting money aside in our Stocks and Shares ISA.

You can put aside up to £20,000 in a Stocks and Shares ISA which is a tax-efficient way to save because you don’t pay any income tax or capital gains tax on returns. This means that whatever you’re saving for, an ISA could potentially help.