Self-employment gives you the freedom to work how and when you want. As a result, it’s no surprise that self-employment is becoming increasingly popular in the UK, especially after the pandemic pushed people to rethink their careers and life goals.
In addition to going freelance or starting their own company, many people have decided to switch careers over the past couple of years. Accounting is a particularly appealing career choice for many reasons, including its stability, opportunities for advancement, and, of course, the high earning potential.
However, whether you’re an experienced accountant or you’re yet to start your accounting qualifications, becoming self-employed can be a difficult process. To learn more about becoming a self-employed accountant and navigating potential issues along the way, keep reading this helpful guide.
Why Do People Choose Self-Employment?
Being self-employed is an attractive prospect for many reasons. First of all, self-employment gives you the flexibility to choose when and where you work, helping you fit work around your family commitments and hobbies. This is perhaps the main reason why people are drawn to self-employment, particularly if they have children.
Furthermore, self-employment allows you to be more independent and take your business in any direction you want. Being your own boss means you won’t have to answer to anyone else, which many people enjoy.
Accounting is an extremely popular career choice among self-employed individuals. Experienced accountants can charge high hourly rates, making this profession especially lucrative. In addition, since there will always be companies looking to hire accountants, this is a much more stable career for those who are worried about the risks of setting up their own business.
How Can You Become a Self-Employed Accountant?
With all of these benefits, it’s no surprise that many people want to become self-employed accountants and set up their own accounting businesses.
Below, you’ll find a step-by-step guide to becoming a self-employed accountant, including advice on how to become qualified, sort out taxes, find clients and select the right accounting packages.
Step 1: Obtain the Right Qualifications
If you already have a degree in accounting or you have experience and qualifications gained from employment at an accounting firm, you can skip ahead to step 2.
You can still get into this career even if you don’t have an accounting background, which is why it’s appealing to so many people. The minimum qualification you’ll need is the Association of Accounting Technicians (AAT), which you can study without any previous accounting qualifications.
There are various levels to this qualification, which will allow you to perform different accounting services (e.g., audits, payroll, tax). To offer your services as a freelance accountant, you’ll need the Level 4 diploma (AAT Professional Diploma in Accounting). This will take around 12-18 months.
To gain more experience and become a chartered accountant, you can study for the Association of Chartered Certified Accountants (ACCA) qualification. This qualification involves a maximum of 13 exams and requires you to evidence three years of practical work experience, so it’ll take at least three years to complete. However, if you have the AAT qualification, you’re exempt from the first three exams.
Upon completion of the ACCA qualification, you’ll be able to provide a full range of accounting services and sign off accounts for global organisations. You’ll also become an ACCA member, which will make you look more professional and trustworthy to clients.
Step 2: Register With a Supervisory Authority and the ICO
Once you have the right qualifications, you can start the journey of becoming a self-employed accountant.
To operate as a freelance accountant or start your own accounting business, you’re legally required to register with a supervisory authority so they can monitor your business activities and ensure that rules and standards, including anti-money laundering regulations, are upheld. These authorities include AAT, ACCA, the Association of International Accountants (AIA), the Chartered Institute of Management Accountants (CIMA), and many more.
Next, you must register with the Information Commissioner’s Office (ICO), an independent authority that upholds information rights, and pay a data protection fee. All sole traders and businesses that process personal information need to register with the ICO, and since you’ll be handling confidential client data, this is something you must do.
Step 3: Notify HMRC
Another vital task you need to complete before you start working is notifying HMRC that you’re now a sole trader or the owner of a limited company. This will affect the taxes you pay.
Becoming a sole trader is generally less complicated, so this may be a good choice when you’re just starting out. As a sole trader, you’ll need to register as self-employed with HMRC and complete a self-assessment tax return.
However, if you choose to set up a limited company, this will give you limited liability for any debt your business incurs, thus protecting you financially. You must pay corporation tax if you own a limited company, and you must also register your company with Companies House.
Step 4: Purchase Equipment
After you’ve registered with the appropriate authorities and sorted out your taxes, you can get started on setting up your business. Depending on what you already have, you may need to purchase a lot of equipment, so make sure you save money to cover your start-up costs.
As a freelance accountant, you’ll need a home office space where you can work efficiently. Of course, you’ll need a suitable laptop, chair, desk, printer and storage unit in your home office, and make sure you stock up on necessary office supplies such as paper, pens, a calculator, et cetera.
Selecting the right accounting software is another important task. This will help you prepare VAT returns, maintain financial records and forecast cash flows. The best accounting software packages will also provide you with in-depth financial reports, which will help you offer your clients advice on their business strategy and how to cut costs.
Choosing a popular accounting software package will make it more likely that your clients are already familiar with it, which will make things run more smoothly. However, you should always shop around for the best deal and pick the software you’re comfortable with using.
Step 5: Get Business Insurance
One of the downsides of being self-employed is that you could be liable for mistakes you make while offering accounting services. As a business owner, you could also run into issues if your office is damaged or you cause property damage while carrying out your work.
Therefore, it’s a good idea to invest in business insurance to protect you from legal fees. Here are some types of business insurance you should look into:
- Professional indemnity insurance. This will protect your business from costs related to mistakes you make and claims involving contract disputes and intellectual property disputes.
- Business interruption insurance. This will cover loss of income if your office is damaged by a fire, flood or other disaster.
- Business contents insurance. This covers the cost of your equipment in the event of loss, theft or damage.
- Public liability insurance. This will protect your business if someone makes a claim against you due to an injury or property damage.
It’s essential to be proactive and ensure that you’re adequately covered in the event of a claim against you for negligence. But how? First, understand your specific insurance needs as a self-employed accountant. Based on your assessment of potential risks, choose the appropriate insurance policies. It’s advisable to consult with insurance professionals who can help you navigate the insurance coverage’s complexities.
To make an informed choice, ensure you obtain multiple quotes from insurance providers or brokers to compare premiums, deductibles, coverage limits, and terms. You can check the insurance provider’s website or contact them via phone or email. Also, explore bundling options for potential cost savings.
You must review policy limits carefully, ensuring they are adequate for asset protection and liability coverage and comprehending any exclusions, limitations, or terms within the policies. Additionally, make it a point to regularly review and update your insurance coverage, budget for insurance costs, and implement good risk management practices to ensure you remain adequately protected over time.
Step 6: Find Clients
If you already have experience as an accountant, it will be easier for you to find clients since you can get in touch with your contacts in the industry. You may have already established strong relationships with previous clients, which will be a huge advantage when you’re starting your business.
However, if you’ve only just obtained your accounting qualifications, you may find it harder to get started. Try reaching out to your friends and family first; if you know someone who runs a small business, they could be interested in your accounting services.
It’s also a good idea to use freelancer websites like PeoplePerHour to find clients. Create a professional-looking profile and set competitive rates to improve your chances. Over time, you’ll build a strong network of clients and gain plenty of experience.
Once you begin acquiring clients, take care of them by prioritizing open and responsive communication, tailored to their unique financial goals and needs. Deliver accurate and timely accounting services while ensuring transparency in fee structures. Empower clients with financial knowledge, keeping them informed about their financial status, opportunities, and risks.
Furthermore, leverage modern technology for efficiency and provide year-round tax planning advice. Uphold client confidentiality and security, while continuously updating your professional knowledge. Also, keep meticulous records of interactions and work performed for future reference and dispute resolution.
Step 7: Focus on Marketing
Another way to gain clients is to improve your marketing strategy. This will ensure that more people learn about your accounting business and become interested in your services.
First of all, you should definitely set up a website for your accounting business. This will help people discover more about your business and what you offer. You should clearly state the services you can provide, and perhaps you could offer discounted prices for different service bundles on the site. As you gain positive reviews and testimonials, you should place these on your website too to display the quality of your work.
In addition, you should set up social media accounts for your accounting business to expand your network. Setting up a LinkedIn account is particularly important as this will give you more networking opportunities.
Speaking of networking opportunities, attending industry events will also help you meet potential clients. Moreover, hearing from leading voices in the industry at these events will give you useful advice you can use to grow your business.
Conclusion
Whether you’re an experienced accountant or someone who’s looking for a new career, becoming a self-employed accountant can be a long and difficult process. However, as long as you follow the steps in this guide, your journey to self-employment should be easier to navigate.
Although it can take a long time for you to establish yourself as a freelancer or grow your business, there are many benefits to self-employment, including flexibility, independence and the satisfaction of building something all by yourself. Enjoy all of these benefits and more by starting your freelancer journey today.
