What I Like and Dislike About Being Self-Employed

Summary

The author discusses the personal benefits and challenges of being self-employed, particularly in the IT contracting field in London, and offers advice on transitioning into self-employment.

Abstract

The article titled "What I Like and Dislike About Being Self-Employed" delves into the author's experience with self-employment, highlighting the flexibility and tax efficiency as key advantages, while also acknowledging the unpredictability of income and lack of employee benefits such as paid sick leave and holidays. The author, an IT contractor, emphasizes the abundance of opportunities in London for contract work, which provides a relatively stable income compared to permanent employment. The piece also advises on the practicalities of self-employment, such as the need for business insurance, the potential for work gaps, and the importance of hiring an accountant to manage financial obligations. The author suggests that individuals considering self-employment start with freelancing on the side before fully committing, to ensure a stable income and maintain job security.

Opinions

The author values the flexibility of choosing when to take holidays and the ability to work from different locations.
They appreciate the tax benefits of operating as a limited company in the UK, including paying themselves through salary and dividends.
The author acknowledges the importance of being able to claim work-related expenses, such as laptops and phones, as company expenses.
They express discontent about the unpredictable nature of contract work, which can lead to periods without income.
The need for professional help, like an accountant, is seen as a necessity rather than an option to manage the bureaucratic aspects of self-employment.
The lack of paid sick leave and holidays is a significant downside, necessitating careful financial planning and insurance coverage.
The author believes that self-employment is a personal choice that requires careful consideration of the pros and cons, and it may not be suitable for everyone.
They recommend a gradual transition into full-time self-employment, starting with side freelancing while maintaining a permanent job for security.

Why did I become self-employed then?

Back in 2015, I decided to quit a permanent job and become an IT contractor. Since then, I’ve been contracting for big companies and also getting some side gigs to complement my income.

At the time of writing this article, I’m living in London. There are a lot of opportunities here for independent contractors and you can find work easily. Normally, these contracts would last for a few months, so it’s a pretty stable way of working. Not as stable as a permanent position, but manageable.

Becoming self-employed allowed me to do some small work on the side as well. You can do this too if you are an employee, but you still need to become self-employed, do your invoices, tax, etc. As a contractor, I have my own limited company and I create invoices for one or more companies I work for.

What do I like about it?

I have more flexibility when it comes to deciding when to go on a holiday (without having to ask for permission).

I can claim some expenses like laptops, monitors, mobile phones as a company expense. However, it has to be related to the work I do.

I can work from wherever I want from time to time. This depends on the client, of course, some of them prefer having you in the office while others don’t mind as long as you get the job done.

It’s more tax-efficient. This can vary from country to country. In the UK, I pay myself a salary and dividends and my company pays corporation tax and VAT.

What do I dislike about it?

You can have gaps between contracts and sometimes can be for a few weeks or months.

Although you can do the bureaucracy yourself, it’s advisable to hire an accountant so you can focus on what you do best.

You need business insurance to work for certain clients.

You don’t have paid sick leave nor paid holidays, so you need to manage your cashflow well and have insurance just in case something happens to you. Because we all have times when we can’t work due to illness, accidents, etc.

You have to pay for your own education/training. Although you can claim it as a company expense.

It’s a personal choice to whether become self-employed or not and you have to ponder the pros and cons to see if it’s something suitable for you. In my case, as I live in London, is a clear choice, as I rarely run out of clients to work for.

I would recommend starting freelancing on the side and then quit your job if you think you can make a full income with just your freelance work.

For most people though, I think it’s better to have a permanent job and do freelancing on the side. This way, you will not only earn extra money but also have more security as you will have two sources on income. So if you lose your job, you will still have money coming in.

What I Like and Dislike About Being Self-Employed

It’s not an easy path but worth it

Why did I become self-employed then?

What do I like about it?

What do I dislike about it?