Many people approach self-employment with a sense of elation; the thought of freedom from wage slavery, the corporate way of life and the flexibility to manage your own workload and hours. Freedom is often synonymous with self-employment for those contemplating the step to contract work. But once that step is taken there are often surprises in store for those working for themselves. Preparing yourself for self-employment is crucial and finding the right model to suit your skills and abilities is one of the quickest ways to success. Setting up your own Limited Company, working through an Umbrella company or going it alone are three important choices to consider. The first and last are both more complex than you may think, while an umbrella company may be the most suitable for many contractors - saving time and frustration.

So what does working for yourself entail?

To state the obvious, self-employment means just what it says; you work for yourself. You not only do the day-to-day job, but you will be responsible for marketing, accounting, managing your diary, making appointments, liaising with suppliers, ordering, stock taking, human resources (managing yourself), dealing with correspondence, general admin, catering and cleaning. If you feel like throwing a "sickie" the only person you'll have to convince is yourself! The list is not exhaustive, but you should be getting the idea by now. If the majority of your work is contracting to an employer some of these tasks can be crossed off the list - hopefully they will have their own cleaning staff for example. Even so, as a sub-contractor dealing with your own tax returns and accounts will be necessary - often when the day job finishes the night job starts. Tax is one of the most daunting areas for many newly self-employed people - understanding the complex arrangements that you will need to comply with and what you can and can't claim for.

Limited company or an umbrella company?

Limited company formation has many advantages for the self-employed contractor, but an umbrella company is often the simplest arrangement for many newly independent contractors. Certainly the complexities of the tax system can be avoided as you will be paying tax through the PAYE system and receiving your salary direct from the umbrella company. You can still take advantage of claiming expenses incurred as a contractor when working 'for' an umbrella company and the company itself will be able to offer advice and information on making these claims.

Starting out simply

Different models of self-employment can work for different people and much will depend on your personal circumstances - an umbrella company is often the simplest most straight forward arrangement for those starting out as contractors and freelance working, allowing for considerable flexibility and saving considerable amounts of time and money.

For the self-employed, tax can be a headache. Using an umbrella company or forming a limited company can be an efficient way to manage tax affairs, but ensuring you get the right structure for your business is essential.