15 Ways To Protect Yourself And Your Business – What Tradesmen Need To Know

tradesmen insurance

Working for yourself can be hugely rewarding, both financially and in terms of giving you more control. But it’s not all plain sailing for tradespeople who run their own business. As a tradesman, there’s tax to get to grips with. Potential staffing issues to contend with. And a whole lot of other essentials, from insurance to finding the right van, to sort out. Find out how to protect yourself and your business with our essential ‘what you need to know’ guide.

First, let’s talk vans: Buying the right wheels and keeping it on the road

It may be a bit of a cliché, but a work van is one of your most important pieces of kit. Without it, you’ll find it hard to get to jobs to quote or carry out work.

1) What size van is right for you?

When it comes to your van, size does matter. For some tradespeople, the payload is all-important, and you’ll need a certain size van just to fit your essential work kit into. But a bigger van can also mean higher running costs, which should be factored in when making a decision. Consider features that will make your everyday life easier too. For example, do you need a high roof or the open load space of a tipper or pickup?

Things to do today:

2) Should you buy a van or lease one?

Once you’ve decided what van is right for you, the next question is should you buy or lease. Both options can be offset against tax. But leasing a van could be a good option if you’re struggling to find the lump sum to buy a van outright. You’ll pay instalments over the term of your contract. It may cost more to lease in the long run compared to buying outright. But there are also other benefits to consider, such as the fact you won’t be responsible for maintenance, including breakdown, costs.

Things to do today

 

3) Keeping your van safely on the road

Once it’s over three years old your van will need an annual MOT. Without it you can’t tax your vehicle and without tax or an MOT your insurance is likely to be invalidated.

Things to do today:

Next, let’s look at insurance

It might not be the most exciting way to spend your hard earned cash. But tradesmen insurance is one of those essentials that you can’t afford to ignore. From legal claims against you to having your tools nicked, it pays out if anything goes wrong.

4) Finding specialist cover

When it comes to insuring your business there’s no such thing as one size fits all. An independent insurance broker can access all the specialist premiums that your business might need and can give you valuable help and advice. Take advantage of their help to make sure you don’t leave yourself or your business open to risk. And also use an expert broker to build a bespoke insurance package for you, so you’re not paying for any cover that you simply don’t need.

5) Types of specialist tradesmen insurance you may need to consider:

  • Public liability insurance
  • Professional indemnity insurance
  • Tools insurance
  • Van insurance
  • Van breakdown cover
  • Employer’s liability insurance
  • Business premises cover
  • Personal injury
  • Stock cover
  • Plant insurance (both own and hired in)

6) Public liability insurance:

Regardless of how careful you may be, accidents can and do happen. Public liability insurance pays out if a member oft he public suffers and injury or damage to property as a result of something to do with your business. It pays out for a legal team to defend your case and pays any compensation that is awarded.

Although public liability insurance is not a legal requirement, most tradespeople would consider it an essential for financial peace of mind. It’s also often specified as a legal requirement on many contracts, so you should check this too to see if there is a set liability amount that you need to hold.

7) Do I need employer’s liability insurance?

If you employ any members of staff you are legally required to take out employer’s liability insurance. This includes staff who are part time, agency workers under your supervision and apprentices. Without it you can be fined. Like public liability insurance, it pays out for any injury or damage to property caused by something to do with your business.

8) What is professional indemnity insurance?

As a tradesman, you’re often required to give your professional advice on how something should be done. Unfortunately, sometimes mistakes can be made. If you have professional indemnity insurance any mistakes that lead to a financial or professional loss for your client will be covered. You’ll have peace of min that legal costs and any compensation that is awarded will be paid.

9) Shopping around for the best insurance deal

Like all insurance, shopping around for your business insurance can potentially save you hundreds of pounds.

Things to do today:

  • Use this handy guide from the Association of British Insurers to find out how to buy insurance
  • Set aside a day to ring around as many insurance companies as you can. Or, if you don’t have time, look for an insurance broker with an in-depth knowledge of the unique needs of tradesmen.

Thirdly, let’s talk tax

When you’re self-employed, getting to grips with tax can seem daunting.

10) How to register as self-employed with HMRC

The first thing you’ll need to do is register as self-employed, as a sole trader, or as a business with HMRC. It’s easiest to do this online, and for that you’ll need to create a Government Gateway account. With this, you’ll have access to the government’s online services, including the MNRC’s self-assessment portal.

You should register with HMRC as early as possible, and there is a legal requirement to register by 5th October of your business’ second year of trading.

Things to do today:

  • You can check if you should register as self-employed, as a sole trader or as a business with this Employment Status Indicator
  • Sign up for a Government Gateway account here

11) Complete your annual tax return

The tax year runs from 6th April to 5th April the following year. If you’re self-employed, a sole trader or a business you’ll need to complete a tax return for the year. It can be filed on paper or online. The deadline for paper returns is 31 October. The deadline for completing your tax return online is 31 January. There are financial penalties if you miss this deadline.

Things to do today:

  • To complete your tax return online you need to register for a Government Gateway account (see above)
  • Log into your account here
  • It’s possible to complete your tax return yourself or you may decide to use an accountant to help you. Find a chartered accountant from a directory of over 21,000 firms across the UK held by the Institute of Chartered Accountants here

 

12) Do I need to register for VAT?

The current threshold for VAT is £85,000. If you or your business have a turnover of this amount or more you must register for VAT. You may also choose to register for VAT if your turnover is below this amount.

Things to do today:

13) Understanding what items are tax deductible

Every business has an income and expenditure. Some of the costs associated with running your business can be deducted to give you your total profit. You are then taxed on this profit.

What are allowable expenses?

The things that you can deduct to give you your taxable profit are called allowable expenses. These can include:

  • Office costs, like stationary and pens
  • Travel costs, including parking, fuel and train tickets. The HMRC approved mileage allowance is 45p per mile for the first 10,000 miles and 25p per mile for 10,000 miles and over
  • Clothing, like uniforms or essential safety clothing. You can’t claim for the initial purchase of uniforms, but can claim for things like cleaning as well as replacing uniforms. Certain tradespeople, including builders, roofers and joiners, can claim a set rate laid out by the government. If you have spent more than the set rate, you can claim above this amount as long as you have the receipts
  • Staffing costs, including subcontractors
  • Financial costs, such as your insurance or bank charges
  • The cost of stock, such as raw materials
  • Costs associated with your business premises, including lighting, heating, telephone costs, and business rates
  • Costs associated with marketing your business, such as website costs or paying for adverts
  • Subscriptions or membership fees for professional bodies

Things to do today:

If you need more help, get in touch with HMRC:

  • Twitter: @HMRCcustomers
  • Phone: 0300 200 3310
  • Textphone: 0300 200 3319
  • Outside UK: +44 161 931 9070
  • Opening times:

Monday to Friday: 8am to 8pm
Saturday: 8am to 4pm
Sunday: 9am to 5pm

Closed bank holidays, Easter Sunday, Christmas Day, Boxing Day and New Year’s Day.

Finally, what other decisions are there?

14) Forming partnerships

Sometimes you may decide to join with one or more other people to form a partnership. With a partnership, you and your partner share responsibility for the business. A partnership doesn’t have to be with another person. A limited company is considered a ‘person’ so could be a partner. Depending on your situation, you may decide to opt to form a limited partnership or a limited liability partnership.

  • Limited partnership – A limited partnership is a type of partnership that consists of at least one general partner and at least one limited partner. In a limited partnership, the general partner must pay self-employment taxes on money received from the company, while limited partners are not required to pay self-employment taxes. Limited partners receive proceeds from the business after the general partners have received their share of company profits.
  • Limited liability partnership (LLP) – A limited liability partnership does not have a general partner. Every partner in an LLP has the ability to take part in the management of the company. Each partner must pay self-employment taxes on their share of the company’s profits and losses. Each partner receives profits and losses from the company according to her ownership interest in the company.

Things to do today:

15) Taking on an apprentice

Taking on an apprentice can help your business to grow. An apprentice can bring new skills and knowledge to your business. And the government will help you pay for training. Don’t forget though, an apprentice is considered an employee, so you’ll need to take out employer’s liability insurance.

Things to do today:

  • Complete the online enquiry form to take on an apprentice in England
  • In Scotland call 0800 783 6000
  • Call the Apprenticeships Hotline on 0300 2007876 in Northern Ireland
  • In Wales, register your interest using this form

Becoming your own boss can give you more freedom and can be a good move financially. But there are potential pitfalls. You’ll be solely responsible for the success of your business. And you’ll need to consider all the administrative tasks, from filing tax returns to taking out essential insurance.  If you’re ready to make the leap, good luck!