{"id":814,"date":"2017-02-08T00:00:00","date_gmt":"2017-02-08T00:00:00","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/knowledge\/articles\/the-cost-of-being-self-employed-things-to-consider\/"},"modified":"2026-01-20T14:32:38","modified_gmt":"2026-01-20T14:32:38","slug":"the-cost-of-being-self-employed-things-to-consider","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/starting-out\/the-cost-of-being-self-employed-things-to-consider\/","title":{"rendered":"Starting your own business? These are the hidden costs to keep in mind"},"content":{"rendered":"\n

If you\u2019re considering becoming self employed, there are a number of costs you\u2019ll need to keep in mind. We\u2019ve summarised the main ones to help you plan ahead.<\/p>\n\n\n\n

1. Stock and equipment<\/h2>\n\n\n\n

Depending on the type of business you plan to run, you may need to purchase stock and equipment.<\/p>\n\n\n\n

If, for example, you\u2019re becoming a freelance graphic designer, you\u2019ll need a computer, the required software, and perhaps a graphics tablet. If you\u2019re striking out on your own as a plumber then it\u2019s a commercial van<\/a> and tools that you need. For online or physical shops, you\u2019ll have to think about what you\u2019re going to stock and how much.<\/p>\n\n\n\n

It\u2019s important to take these costs into account as not budgeting for them correctly could mean your business falls at the first hurdle.<\/p>\n\n\n\n

2. Premises<\/h2>\n\n\n\n

Another primary consideration should be your business premises. For certain businesses you may want to work from home, or you’ll be working remotely at a client\u2019s building.<\/p>\n\n\n\n

However, other businesses will need a separate location, such as a shop front. If you\u2019re planning to buy or lease a building you should take this cost into consideration, as well as any equipment you’ll need to install and decorating that will need to be done.<\/p>\n\n\n\n

3. Dental and healthcare provisions<\/h2>\n\n\n\n

Once you\u2019ve covered the first two points, there are some other costs that might be less obvious at first glance.<\/p>\n\n\n\n

While some employers provide dental and healthcare plans to their employees, if you set out on your own you\u2019ll need to remember that these costs will no longer be covered. Of course, dental treatment and healthcare are provided on the NHS, but dentist appointments start at \u00a327.40 for just a check up, and if you want to go private the costs will be considerably higher.<\/p>\n\n\n\n

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4. Tax<\/h2>\n\n\n\n

Unfortunately, tax can be easy to forget when you become self-employed. When you\u2019re employed by someone else, they take care of your income tax and National Insurance contributions, but as someone who\u2019s self employed you need to manage these yourself.<\/p>\n\n\n\n

Remember to register for your Self Assessment tax return<\/a> and to complete your tax return every year. If you forget, you could receive a hefty fine from HMRC. Our guide for a stress-free tax return<\/a> will help put your mind at ease.<\/p>\n\n\n\n

It’s also worth keeping in mind that a lost of the costs detailed in this article will count as self-employed expenses, which are tax-deductible. It’s important to know what is and what isn’t an allowable expense, so check out out articles on self-employed expenses<\/a>.<\/p>\n\n\n\n

5. Holiday and sick pay<\/h2>\n\n\n\n

One of the biggest drawbacks to becoming self-employed is that you’ll no longer be entitled to holiday and sick pay. If you run a small business or freelance then, at least at the start, you\u2019ll only have the money that you\u2019re able to earn.<\/p>\n\n\n\n

So if you can\u2019t make it to a particular job because you\u2019ve come down with the flu, unfortunately you won\u2019t be paid. However, the upside of being your own boss means managing your own time, and if you\u2019re able to shuffle things around, you\u2019re less likely to lose out because of sick time and holidays.<\/p>\n\n\n\n

6. Pension planning<\/h2>\n\n\n\n

Another consideration when you become self-employed is your pension. When you work for someone else you can pay into a pension without even having to think about it, but when you\u2019re your own boss, pensions require a bit more work.<\/p>\n\n\n\n

There are a number of options for freelancers and small businesses when it comes to pensions. Check out our guide to pensions for the self-employed<\/a> if you want to know more.<\/p>\n\n\n\n

7. Insurance<\/h2>\n\n\n\n

Last but not least, insurance is an important consideration for anyone who\u2019s planning to go self-employed.<\/p>\n\n\n\n

If you work at external locations or invite clients or customers to visit you, then you may want public liability insurance<\/a> to protect you against claims made in the event of damage or injury to their parties.<\/p>\n\n\n\n

If your work could possibly cause a financial loss for your client, for example if you give them incorrect advice or accidentally send sensitive information to the wrong people, then it\u2019s professional indemnity insurance<\/a> you should consider.<\/p>\n\n\n\n

Depending on the type of business you\u2019re setting up you may want a range of other covers, including business equipment insurance<\/a>, tool cover<\/a>, and personal accident insurance<\/a>. When you\u2019re planning your business, it\u2019s a good idea think about whether or not you\u2019d be able to keep trading should the worst happen and you\u2019re not covered, and buy your insurance accordingly.<\/p>\n\n\n\n