Before you take the leap

Key points

• A clear reason is more useful than a vague sense that you ‘should’ work for yourself.
• People start for different reasons — lifestyle, income, or a problem they care about solving. Naming yours makes later choices easier.
• It is worth asking whether you would still want this in a few years, not only whether it sounds good this week.

Key points

• A licence is official permission to do certain work (for example some trades or care roles). A professional body is an organisation that sets standards for a profession. A DBS check (England and Wales) or PVG check (Scotland) is a criminal-record check often needed if you work with children or vulnerable adults.
• Personal data means information that identifies people — names, emails, addresses, health details. The ICO (Information Commissioner’s Office) is the UK regulator for data protection. Many businesses that handle personal data need to register with the ICO and pay a fee, unless an exemption applies.
• Even as a one-person business, rules about how you treat customers, keep data safe, and work safely can still apply.
• Looking this up before you take on clients is usually simpler than fixing it after you have started.

Key points

• What you need depends on the work you do — there is no single ‘business insurance’ that fits everyone.
• Three names you will hear: public liability (if someone is injured or their property is damaged because of your work), professional indemnity (if advice or a professional service goes wrong and causes a loss), and employers’ liability (usually required by law if you employ staff).
• Some clients ask to see proof of insurance before they hire you. It is useful to know that early.

Key points

• Working from home is common. Before you assume it is fine, check your tenancy or mortgage and your household insurance.
• If you visit clients at their offices or homes, think about travel, safety, and who is responsible while you are on their site.
• Renting an office or studio is an ongoing cost. It helps to know why you need it before you take it on.

Key points

• Naming a product is easier than naming a customer. Start with who has the problem — for example, independent café owners in Glasgow who still invoice by spreadsheet, not ‘anyone who runs a business’.
• Early sales usually come from a small group you can actually reach: ten local tradespeople, a handful of clinic managers, or one industry WhatsApp group you already know.
• If you cannot name a first ten conversations — roles, towns, or where you would find them — the offer may still be too broad.

Key points

• Going alone is one option. Working with a friend or partner is another. Neither is automatically safer.
• It helps to write down early: how profits are shared, who decides what, who puts money in, and what happens if one person wants to leave.
• A short trial period is often easier to agree now than to untangle later. This is general information, not legal advice — a solicitor drafts a proper agreement.

Key points

• The basics: record sales (invoices or till takings), costs, and what each amount was for. HMRC can ask to see this. A bank feed you actually look at is more useful than a shoebox at year-end.
• Not all expenses are tax deductible. An allowable expense is a cost HMRC lets you deduct when you work out taxable profit. Personal spending is not. If something is used for both business and personal reasons, only the business share may count. Check HMRC’s expenses guidance rather than assuming a cost reduces the tax bill.
• Many UK banks let you categorise transactions in the banking app — a reasonable starter so you can see where money went. As things get busier, or when VAT and Making Tax Digital are in view, it is worth exploring accounting software such as Xero, QuickBooks, or Sage: they connect to the bank and keep a proper ledger. We typically work with Xero.

Key points

• A dedicated business current account is simply an account used for the work: sales in, costs out, cleaner records. For a limited company, a separate company account is the normal way to keep company money distinct from your own, because the company is a separate legal person. For a sole trader it is still useful for records — and it is a different product from a company account.
• Banks and app-based providers compete for new customers. Introductory offers can include cash or credit on joining, a period of free banking, help with company registration, or a stretch of free accounting software such as Xero. The details change, and they are not all equivalent. This page does not recommend a provider.
• An offer can quietly decide the structure for you. Free company registration, for example, only fits if a limited company is the right setup — and that is the part that is hard to unwind. Opening the account, or forming the company, before you have sat with the business plan and talked the sole-trader vs limited-company choice through with someone who can look at your facts, is how people end up doing things twice. The offers will still be there; a premature setup is the expensive part.

Key points

• A sole trader is you trading under your own name (or a trading name). You and the business are the same in law: you register as self-employed with HMRC (HM Revenue & Customs — the UK tax authority), keep records, and pay tax on the profits. If the business owes money or is successfully sued, your personal assets — such as savings or your home — can be at risk. That is what people mean by unlimited personal liability.
• A limited company is a separate legal ‘person’ from you. You register it at Companies House (the official register of UK companies). The company keeps its own accounts, files a yearly confirmation statement (a short update confirming company details), and usually pays Corporation Tax on its profits. Directors have legal duties. Limited liability means the company’s debts are normally the company’s — though you can still be personally at risk if you give a personal guarantee (for example to a bank) or break certain rules.
• The day-to-day admin and how you pay yourself also differ. As a sole trader, money you take for yourself is often called drawings. In a company, people usually pay themselves a salary and/or dividends (a share of profits). Which setup fits depends on risk, profit, and how you want to run things — that is a conversation for your own facts, not a slogan.

Key points

• Incorporation is the formal step of creating a limited company. A registration fee is only the start; you also take on yearly filing duties.
• Online formation is often quick, but the details need to be right — mistakes can create extra admin later.
• Think of incorporation as the start of a regular paperwork rhythm, not a one-off task you finish and forget.

Key points

• Taxable turnover is the value of sales that count towards VAT, not your profit. As at September 2026, you must register if that figure for the last 12 months goes over £90,000, or if you expect it to go over that in the next 30 days.
• That 12-month count is a rolling period, not the tax year (6 April to 5 April). You can also choose to register voluntarily below the threshold — useful for some businesses, less so for others.
• The deregistration threshold (when you may be able to leave VAT) is currently £88,000. How you charge VAT day to day (standard rate, flat-rate scheme, and so on) is a separate decision once registration is on the table.

Key points

• If you are registered for VAT, MTD for VAT already applies for most VAT-registered businesses: you keep digital records and file VAT returns with compatible software.
• MTD for Income Tax is being rolled out in stages for many self-employed people and landlords. It is based on qualifying income (broadly your gross turnover from self-employment and property income — the money in before costs — not your profit). As at September 2026: 6 April 2026 if more than £50,000 (2024 to 2025 Self Assessment); 6 April 2027 if more than £30,000 (2025 to 2026 Self Assessment); 6 April 2028 if more than £20,000 (2026 to 2027 Self Assessment).
• A limited company usually pays Corporation Tax instead of Income Tax on company profits. If the company is VAT-registered, MTD for VAT can still apply. So the Income Tax timetable is not the whole picture for every setup.