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Electricians Guide To Going Self-Employed

Posted by Elaine Hammond on 18th March 2019

If you’re thinking about becoming a self-employed electrician, once you have completed your training, we would always recommend working with an experienced electrician first. This will allow you to gain confidence and experience before going it alone. You can do this by working as an electricians mate, working for an electrical contracting firm, or you may have completed an apprenticeship.

Once you feel confident that you have gained enough experience and are competent to go it alone, you may now be ready to take the next step.

Things to consider before going self-employed

Going self-employed effectively means that you are setting up a business. However, before you go much further there are certain things you will want to consider, which include:

1.  How will I acquire new customers?

2.  How would I cope during quiet periods of no or little income?

3.  Do I have enough money to get set up? – ie. buying new tools and a van/car

4.  Can I get by without having the benefits of paid holiday, sick pay and pensions contributions?

5.  Am I OK working on my own?

6.  Can I manage my cashflow, record keeping and completing tax returns?

7.  What insurances do I need?

8.  Do I need to join a competent person scheme?

What are the advantages of being self-employed?

There are plenty of advantages to being self-employed and these include:

Being your own boss – you get to have a more varied work load as you get to choose the type of work you take on.

Being able to work with more flexibility – you will have more control over the hours you work, which will allow you to arrange your day around any other commitments you may have.

Being able to achieve a much higher income - if you put in the hard work you will be able to earn more. This is mainly because you can charge  hourly or day rates, which can to be higher than some standard salaries. Day rates can vary depending on your experience and region but range from approx. £140 - £350 per day.

Offset your tax liability – there are certain costs that you are able to deduct from income when calculating your tax liability, eg. your equipment/tools, mileage, stationery, etc. To find out more click here

What are the disadvantages of being self-employed?

Of course there will always be some disadvantages to going self-employed and these include:

Start up costs – you will need to have in place some money to get you started as you will most likely need to buy new tools, a van/car, insurances etc.

Finding customers – this can be challenging to start, and you will need to find ways to advertise your services to get noticed!

Income – your income will no longer be consistent. You will need to ensure you can keep up with any bills, loans, mortgages, rents etc. You will also need to bear in mind that during times when you are off work, due to sickness or holiday, you won’t be getting paid.

Admin – when you work for yourself you will be responsible for admin side of your business, ie, scheduling in work, quoting, invoicing, insurance, etc. You will have to ensure that you are complying with regulations.

Sole Trader or Limited Company?

Once you have decided to go self-employed your next choice is whether to start up as sole trader or a limited company.

Sole Trader: An advantage to becoming a sole trader is that it is relatively easy to set up. There are also certain expenses you can subtract from your income when calculating your taxable profit, you can check the government website for more detail, but these include business related travel, business insurances, stock, etc.

Disadvantages are that it could be hard to raise finance as lenders tend to prefer to lend to limited companies. The tax rates aren’t always great especially when you reach a certain level of earning. Another thing to consider is that as a sole trader you are the sole owner of the business and as such have unlimited liability. This means that if your business finds itself in debt then you are personally liable and if things go wrong you could end up losing personal assets.

As a sole trader there are certain things you will need to do:

firstly set up as a sole trader, you can do this via the GOV.UK website

inform HMRC that you are now self-employed as you will now need to pay tax through self-assessment and pay Class 2 and 4 National Insurance contributions. For more info visit Government’s website

arrange your insurances – these could include professional indemnity insurance and public liability insurance. If you employ anyone you will also need to consider employers liability insurance

check whether you need to set up a business bank account. You may be able to use your personal account, however having a separate account will help to keep your business and personal finances separate

put in place a process for recording your profits and evidence of your business expenses – this will help when completing your tax return

if you intend to work from home make sure you check your mortgage or tenancy agreement to ensure you’re not contravening any terms and conditions

consider taking out a private pension to ensure you have money put aside for retirement. The government will still contribute into your pension in the form of tax relief

Limited Company: To set up a limited company you must register with Companies House. This is known as ‘incorporation’. A limited company has its own legal identity and as such is separate from its owners and directors. A limited company has the benefit of having limited liability, meaning that if something did go wrong your personal assets aren’t exposed.

Limited companies are also more tax efficient as you pay corporation tax on any profits rather than you paying income tax. You can also claim tax relief on business expenses. There are more allowances and tax deductible costs that can be claimed against as a limited company. For more info click here.

Despite there being more admin there are other benefits:

1.  Once registered your company name is protected

2.  You will have limited liability

3.  Increased tax-efficiency

4.  You can take a yearly dividend

5.  You will have greater borrowing power

6.  Your reputation and credibility among customers should improve

The disadvantages of a limited company are that there is a lot more paper work and legal fees to consider. These include filing a yearly annual return and annual accounts, which you can either do yourself, or hire an accountant to do them for you.

As a limited company there are certain things you will need to do if you’re changing from sole trader:

decide if you are going to be the only director or whether you want others involved

decide on a name for your company

register your business with Companies House – you will need to create your memorandum and articles of association

inform HMRC that your legal structure has changed – this is important as this affects the amount of tax you need to pay

set up a new business bank account specifically for your limited company

let your insurer know that your legal structure has changed

We would recommend that before you make your decision regarding which route to take, you first speak to a financial adviser or accountant to get some sound tax advice.

Categories: sole trader, ltd company, self-employed, electrician

Case Study - Oliver Lawrence

Posted by Elaine Hammond on 5th March 2019

Name: Oliver Lawrence

Course: C&G 2365

What did you do before you became an Electrician

I worked for larger corporate companies supplying products to the construction industry and various trades in various roles such as sales marketing, operations and management, supplying everything from drill bits and power tools to access equipment and even copper pipe!

Why did you choose to retrain as an electrician?

Having worked for larger corporate companies all my working life I wanted to become qualified in a trade with the long term goal of working for myself and creating a more flexible and balanced work life! I believe that having the right qualifications along with varied, comprehensive experience and on going development is the best way to fulfil this goal, therefore starting with the C&G 2365 at TS4U was the first step on this journey.

The electrical trade had always interested and intrigued me, plus (I shouldn’t admit this) I do like working with rules and regulations!

Why did you decide to take the C&G2365 course and how has this helped you?

I had a long chat with the office at TS4U (as well as with other facilities), they advised on options I could take such as various C&G courses or even an adult apprenticeship. I felt that working through the theory on the C&G 2365 along with the classroom practical’s suited me best, to gain the most solid foundation for working in the electrical industry.

How long have you been working in the electrical industry?

I have been working dedicated to the electrical industry for almost the last 4 years, but I’ve had the pleasure of working with electricians (and other trades) for the last 15!

Have you managed to find employment since training with TS4U?

It is hard work to find work, although I have been lucky as I had a good friend, a qualified electrician who works for a local builder. They happily let me get loads of experience working on site labouring before and whilst I was at TS4U. Since finishing my C&G 2365 I have wanted to work on a purely self employed and sub-contracting basis. I have found plenty of work through local builders and have gained my most valuable experience working for larger electrical contractors on everything from domestic work to larger commercial sites – everything from high end residential properties to a prison and even a cathedral in central London!

I am also a domestic installer with the NICEIC, I think this has been a huge benefit in continuing my development and me finding work.  

How did training with Trade Skills 4U help you?

The training has created a solid foundation for me to start my electrical career.  It has given me the basic understanding and the confidence to operate on site.

Are you planning on taking any other courses?

Yes, the 18th Edition is a must and I am really interested in renewables plus car charging and in due course I want to do my testing and inspection.

What was your overall experience with TS4U?

I think the people really made the whole experience great, not just the tutors who created a good balance between theory and practical but also knew how to adapt to deliver the key subjects in an engaging, meaningful and understandable way, but also the other students who I bonded with, shared the experience and we all helped each through.

What are your plans for the future?

I really want to complete my NVQ and AM2, I am trying to gain experience and continually build my knowledge. Whilst in the long term I want to work for myself I currently get such valuable and fulfilling work with experienced electricians.

What is the best experience you have had so far in your new career?

I can’t place a best experience precisely, I can honestly say I enjoy working everyday, working with my hands, constructing and achieving. I often find myself telling people ‘it doesn’t feel like work!’.

How would you describe the training at Trade Skills 4U?

They are professional and organised, the whole system seemed to run very efficiently from the administration through to the effective classroom based learning plus the practical albeit it in the classroom was challenging and realistic.

Categories: training, electrical course, case study, electrician