Setting up on your own

[Paul830]

Hi everyone

I'm new to this site so please go easy on me. I've been in the electrical game for about 7 years now,I'm fully qualified nvq c&g level 3 now looking to set up on my own next year, I'm going to be doing domestic and commercial,the last thing I want to do is rush in to it and make a big cock up of it all so I'm hoping to get some information on what is needed such as part p,insurance,setting up at the right time ect... as some of you know it's quite daunting and nerve racking so all help is much appreciated.

 

[Doc Hudson]

Welcome to the forum, the first thing you need to do is ignore all that you known about being an electrician and start to learn how to run a business, numerous books and guides are available. https://www.amazon.co.uk/s/ref=nb_sb_ss_i_1_26?url=search-alias%3Dstripbooks&field-keywords=starting+your+own+business&sprefix=STARTING+YOUR+OWN+BUSINESS%2Caps%2C1012 read a few start-up books, then apply your knowledge of electrical work to what you have learnt about managing and running a business. Costings, cash-flow, book-keeping, paperwork, Taxman, quoting and invoicing etc. These type of things tend to be where many people who may be competent to design, install and test a new circuit or installation,  fall down when trying to work for themselves.

Doc H.

 

[Paul830]

That's brilliant I'll take your advice onboard thank you

 

[steptoe]

I'd agree with @Doc Hudson

I've been an electrician for quite a bit longer than 7 years, but I'm I'm to being a businessman like a fish is to climbing trees.

 

[Evans Electric]

Greetings Paul ,     I notice that you felt you needed to say   you were new here and " go easy on me "     I guess you've visited a few times and seen a few "unfriendly" threads .    That is not what this Forum is about .....please feel welcome ....ask away ... you are going about it in the right way , not blundering on , getting advice . 

It can be a bit daunting , but can also be liberating without a boss breathing down your neck .  However I'll list a few things I can think of .

Do you have some jobs lined up ?     

Do you already  have some commercial customers ?  

(1)  Basic PL insurance  is usually £ 2m cover for domestic only  or £5m cover for both.     Not that expensive , shop around but whatever you do ...do NOT mention soldering or gas torches or welding .     Just general contracting including 3 phase.    

(2)  For domestic work you need to notify most jobs to Building Control    under Part P of the Building Regs....they need to know that you are "Competent" .   The only sensible way to do that is to register as a Domestic Installer  with a trade body .   So NICEIC, ELECSA, NAPPIT, and the cheapest STROMA . 

Approx £440    or half that with STROMA. 

You have the qualifications  , you will need test instrument for Continuity / Insulation / Loop impedance /  RCD trip times. 

(3)   Contact HMRC  and National Insurance, tell them you are self employed from whatever date .  NI  is nothing like what you pay as employed but  only covers your state pension  .  (Make sure you keep the payments up)   

(4)  Start a private pension when you can afford it. 

(5)  There is no " Right time "   other than , have you got some work to start off with .   

(6)   Keep your accounts simple .  An accountant for a sole trader shouldn't be charging more than £200  to do your books  as long as you've presented them in a decent order .    I can advise you on that .  Don't let bookkeeping phase you  but whatever you do ,  keep all wholesaler's invoices ...petrol ...road tax... van insurance...van repairs... tools ... computer ...  I'll do a proper list when I get a minute.   

(7)  VAT registration  threshold is £83,000   PA   , if you do a lot of domestic , don't go there , you'll never win a quote .      Commercially , your customer may want you to register although you are under the threshold .  thats a decision you'll have to confront . 

(8)  If you do a lot of commercial / industrial work  do try to open a 60 day account with your wholesaler  , not easy these days , usually 30day  but most commercial customer terms are 60 day .   This means you will be subsidising them for 30 days  and that is the  Disaster Road at 100 MPH .   Most domestic jobs of course , pay on completion. 

(9)  And FFS  make sure you put away YOUR INCOME TAX FOR THE COMING YEAR 

Others will be adding their advice ,  theres a lot of experience on here 

  And  as Steptoe said ,  most of us , including me , are electricians NOT businessmen.     And thats how I like it .  

 

[Paul830]

Thank you Evans for your help,I just know the kind of people you get on these sites, well I'm currently working fully employed for a company so I'm just confused how you go about the steps from being employed to starting on your own. A good friend of mine offered some commercial work for 4 weeks but unfortunately had to turn it down due to my current employment he's a site manager and as offered to give me more work in the future.

 

[Doc Hudson]

To be self employed all you have to do is inform HMRC so that they start issuing you the relevant documentations to declare your earnings for TAX. Anybody can have more than one job and have a mix of employed and self employed. But you need to check that you have no exclusions in your employment contract preventing mutually conflicting employment types within similar industries.

Doc H

 

[Murdoch]

My advice to you is create a spreadsheet and put in a figure for all your fixed annual costs like:

PL ins

PI ins

Vehicle ins

Vehicle tax

Vehicle servicing

Mobile phone contract

Accountants fees

Scheme membership

Calibration

Website set up and first year

Then your variable costs like,:

Fuel

Tools

Advertising

Business cards

Logo'd clothing

Vehicle tyres etc

Replacing tools

Buying new tools

Etc

You need to do this to be able to assess your overheads and don't be surprised if it comes to about £6k 

You also need a separate bank account with cash in it - at least £2k 

And this assumed you have a van.

My only other tip is to save for your tax and NI bill - I buy premium bonds every month. Easy to buy and easy to cash in when you need to plus you may win a prize - I won £25 this month!

 

[ProDave]

Just a few more things.

Your vehicle can either be a company vehicle in which case all the running costs are business expenses as already outlined.

However there is another way which is the way I do it.  The vehicle is mine and I personally pay the purchase cost, servicing etc. Then my business pays me 45p per mile that I use it for business.

It makes your accounts simple as you just pay yourself 45p per mile that you use it for business and enter that as "travel expenses 50 miles £22.50

I find the mileage rate that the business pays me, comfortably covers the running costs of my vehicle and just makes things really simple.

Regarding tax, if you are employed AND self employed, they will very likely just adjust your tax code so that they collect more PAYE tax to cover your self employed earnings, rather than asking for a lump sum payment.

You do not need to employ an accountant. Just keep good records. It all boils down to money in (turnover) - money out (expenses) = proffit (that you pay tax on) the simplest way to do your accounts is just make sure you enter every income and outgoing as SOON as it happens so you don't forget it.

Also you can choose to do your accounts on a "cash basis" which again is what I do. that means you only record incomings and outgoings when you actually make or receive them. i.e you submit an invoice but only enter it into the accounts when your customer pays. You buy materials from a wholesaler, but only enter it into your accounts when you actually pay their bill. Again it makes everything simple.

You will need to work out how much you need to earn and set your hourly rate accordingly. Don't forget all the time spent ordering or collecting stock, preparing invoices etc that you don't get paid for.

It really isn't hard, and like most who have gone SE I would not want to go back to being an employee.
 

 

[Supersparks1234]

A personally would wait until the first day of the tax year. If you register part way through the year with another PAYE job then you will be put onto emergency tax for the next year and a half which will be a pain. 

The VAT threshold is a rolling 12 month period not fixed like the tax year.  

As for insurance. Do not look at price. Look at what gives you and your customers the most suitable cover. 

You will be liable for CIS deductions if you are working for a CIS registered contractor. This will help prevent a huge tax bill at the end of the financial year.

 

[binky]

use the next year to save some money, you will need it, ideally enough to pay your bills for 6 months. Best time to start out is usually spring when the domestic market is most bouyant, and do advertise from day 1, it takes time to get recognition from the public.

 

[Paul830]

Thanks everyone for your help

 

[Tony S]

Have you set out a plan for yourself?

 

[Sharpend]

Well I'm astounded that our dear friend Evans has spoken a whole lot of sense - apart from no4 as personal preference, but for just a regular spark he knows his business!! 

 

[Evans Electric]

I always speak a lot of sense ..............don't I ?   :C     You're not dealing with Stepps here you know  !!! :tongue in cheek      

Just a regular spark  Eh !!!  Splutter !!! Splutter !!!!!     Who taught Sidewinder & Canoey all they know  Eh ?   Eh?      

 

[Paul830]

Tony s I'm in the process of doing it now

 

[Evans Electric]

Thank you Evans for your help,I just know the kind of people you get on these sites, well I'm currently working fully employed for a company so I'm just confused how you go about the steps from being employed to starting on your own. A good friend of mine offered some commercial work for 4 weeks but unfortunately had to turn it down due to my current employment he's a site manager and as offered to give me more work in the future.

That sounds like a promising start . 

If you find yourself sub-contracting to someone ...as said above you will come under the CIS tax scheme.... in my opinion its a pain in the rear  orifice .

Basically they have to deduct 20% from your invoice for income tax .....what you MUST DO is obtain a written notice from them ...showing that deduction . 

I know of many guys in construction who have not done that and had to pay the tax twice. 

If they are refusing to issue a written advice of the deduction ...........(a)   Put tools in van ......(b)  Start engine ...(c)  Press accelerator to the floor ...(d)  release clutch ..(e)  Inform HMRC . 

If you do find you have come under the CIS scheme ,  PM me . There are other pitfalls that need pointing out .    

 

[Supersparks1234]

Almost correct - Only if the company you are subbing for is also registered as a CIS contractor can they deduct CIS tax.  For example - if you subbied for a company that never done construction work then they would not be able to deduct you anything.  

If you do not receive a remittance for the tax deduction then HMRC will accept an invoice backed up by a bank statement so do not worry about this too much.

CIS tax can also only be taken on labour NOT materials.  

CIS is good if you are not VAT registered but a PITA if you are.