A Guide to Being Self-Employed in the UK
After qualifying, personal trainers and group exercise instructors have two main career paths available to them: employed or self-employed.
Being employed means that a set wage will be paid for work done which can provide a financial safety net but also means that earnings are usually capped.
Self-employment means that individuals are responsible for generating their own income but there is no cap on potential earnings and much more work flexibility.
Many fitness professionals take control of their businesses by becoming self-employed. Being self-employed is characterised by taking payment directly from clients, being responsible for sales and marketing and, in many cases, paying rent to use facilities such as gyms or sports halls.
Fitness professionals can be part of a business partnership, be set up a limited company or most commonly, work as a sole trader.
Registering for HMRC tax
Individuals who want to be considered as self-employed must register themselves as such with HM Revenue and Customs (HMRC). This will allow the correct calculation and payment of income tax and national insurance. New traders can do this online at https://www.gov.uk/new-business-register-for-tax however previously self-employed persons will need to submit a CWF1 form.
Application takes ten working days after which an activation code is generated that will then allow the individual to log onto their personal Government Gateway account and complete the process. This is also where most HMRC dealings are managed.
Registration for self-employment must be done in a timely fashion – ideally as soon as an individual starts trading but no later than the 5th of October in the businesses second tax year. Late registration will attract penalties, the severity of which depends on the length and nature of the delay.
If the business turns over an excess of £82,000 it must also be registered for VAT. This can also be done online.
Filling in tax returns
Once registered as self-employed, individuals are responsible for filling and submitting their own tax returns. This is normally done twice a year – the 31st January and 31st of July. The tax return contains details of income and expenditure from which the HMRC will calculate the amount of tax owed. Tax returns can be submitted online via the Government Gateway or by post in paper form.
To ensure all the necessary information is available, self-employed individuals should get into the habit of recording the details of all financial transactions, issuing invoices and receipts, keeping receipts for purchases and saving all bank statements. The best way to make this task as easy as possible to put time aside each week or month for bookkeeping.
Some self-employed people engage the services of an accountant or tax adviser to help with the preparation of tax returns. While there is a cost for such a service, a good accountant or adviser may be able to identify tax-deductible expenses and their familiarity with tax can often save a lot of valuable time that could otherwise be spent working and earning more money. When choosing an accountant or tax adviser, make sure they are members of the appropriate professional bodies and hold the necessary qualifications.
Help and advice for completing tax returns is also available online or by calling the self-assessment helpline on 0300 200 3600.
Opening a business account
For tax purposes, personal and business finances should be kept separate. For this reason, self-employed individuals are encouraged to open a bank account for all business-related transactions.
Many banks offer specific business accounts which provide useful services such as low interest overdrafts, favourable interest rate loans and access to small business advisors.
Branding and intellectual property
Self-employed individuals often create a brand – even if that brand is their name e.g. John Smith Personal Training. Such a brand has an intrinsic value that customers will come to recognize. For this reason, the name under which an individual trades can be registered with the Intellectual Property Office (IPO) to protect it and prevent other people using it.
Other examples of similarly protected intellectual property include designs, ideas, and articles and are all protected from unauthorised use.
If, subsequently, another party uses an individual’s intellectual property, even unintentionally, it may be possible to prevent usage from continuing or seek damages providing they are registered with the IPO.
The importance of insurance
Self-employed individuals are generally responsible for their own insurance. Insurance will limit personal financial liability in the case of accident or injury.
There are two main types of insurance that are pertinent to self-employed exercise professionals:
- Public liability insurance
Public liability insurance covers the trainer should someone be injured as a result of the business or if third-party property is damaged by the trainer or the client.
- Professional indemnity insurance
Also known as professional liability insurance, professional indemnity insurance covers against alleged professional negligence.
Trading without adequate insurance means that, if an incident should occur and legal action is taken against the self-employed individual, costs will be the responsibility of the person being sued. In some circumstances, for example serious injury, this could run into millions of pounds.
While it may seem a little daunting, registering and then trading as self-employed is actually a relatively straightforward process. Once the necessary hoops have been jumped through, being self-employed offers several advantages including no earnings ceiling, flexibility and independence and the satisfaction that is gained by creating and maintaining a business. Being employed may be in some ways easier but can also be much less rewarding.