Setting up a freelance business generally means you’re sole trader. This means you’re solely liable for your own business. As a sole trader you may decide to employ other people to work for you but you’re still the only owner of the business. A sole trader has unlimited liability.
To start your own business you will need a business plan. The business plan isn’t only for yourself but for when you take a loan out to start your business. You will need a business plan to take a loan out to prove you’re worthwhile to loan the money to and appear fully prepared for what you’re going to spend the loan on and if you seem dependable to pay the loan back eventually. As a self employed photographer you will need to register as self employed simply on the HMRC website. You will need to complete tax returns even when there is no tax due to save complications further down the line – must submit tax return in first year of self employment.
Submitting a tax return involves:
- Tax returns are submitted annually (financial tax return runs from April to March) with records of income and expenditure. You need to keep receipts as soon as you start investing in equipment when you’re freelance.
- The standard Personally Allowance is £11,850 which means if you’re earning anymore than that a year you will have to be taxed. The basic rate of tax is 20% only if you’re earning between £11,850 and £46,350. Higher rate of 40% applies to people who earn £46,350 to £150,000. Any higher than that are taxed at 45%.
As a sole trader the copyright belongs to the you (the trader). If you have employees they need to understand that the copyright is yours as the business owner. If you’re in a partnership which often means liability is split 50:50 this means copyright can become complicated and if you’re forming a company make sure the copyright remains with you and not the company.
VAT (Value Added Tax)
VAT is charged on goods and services you buy for yourself in life and in business. VAT is currently charged at 20% this means you need to keep an eye on the current VAT level when budgeting in life and in business. VAT charged to you is re-claimable by businesses or sole traders who register for VAT. Smaller businesses pay VAT but you can claim 4 years worth if you’re VAT registered on goods. There is a compulsory registry at a turnover of £85,000 for your business however if you voluntarily register VAT it can make you/your business appear more legitimate. This does make you more expensive for non-VAT registered customers. Keep in touch with the VAT people so they know you’re reliable (stay in their good books or your benefit).
DAY RATE CALCULATION SHEET
When looking into starting your business it’s important to produce a day rate calculation sheet in order to prepare for costs yourself and to calculate how much to charge people for your services.
It’s important to include personal life too as this effects you budgeting as well. I completed these estimates for the future to get a rough idea as for now I’m still a student. It seems quite overwhelming to begin with but its important to be prepared and realistic.