How to set up a part time business

Want to start your own business without ditching the day job? A part-time business could be just the ticket, and get your small business off the ground with less risk.

The number of part-time businesses in the UK is growing, with more people using their free time to earn extra income, test out a business idea or get their company up and running before ditching the salaried job.

Whether it's making jewellery, home computer repairs, dog walking, bookkeeping, tutoring or artisan breadmaking - part-time business opportunities abound, whatever your interests and skills.

Technology has made running a part-time business possible for anyone. From opening up thousands of potential online businesses, to making it easy to communicate with customers and suppliers at all hours of the day and night, technology is vital in helping a business grow.

What are the advantages of setting up a part-time business?

There are plenty of good reasons to start a part-time business, including:

  • the security of a regular income until your fledging business is able to support you and your family;
  • you can test a business idea before financially committing yourself;
  • you can use skills gained from paid employment or from hobbies and activities you're passionate about;
  • if you're already spending your spare time on a hobby or other activity, you can make money from it with little extra effort.

What are the disadvantages of setting up a part-time business?

However, disadvantages include:

  • part-time businesses often require a lot more time than people anticipate;
  • finding free time in the evenings and at weekends may prove difficult - especially in you've family commitments;
  • extra hours and stress may have a detrimental effect on your day job;
  • by only working part time, it may take longer to establish your business;
  • with tax to pay on both incomes, your part-time business may not make financial sense.

Registering your part-time business for tax

You must contact HM Revenue & Customs (HMRC) to register your business - no matter how small it is and regardless of whether you're continuing to work for an employer. These requirements are the same whether you're starting a full or part-time business but there are other issues to consider that are specific to part-time businesses. You can choose to set up as a self-employed sole trader or as a limited company, depending on which best suits your business and circumstances.

As a sole trader you must pay income tax on your business profits along with National Insurance contributions. You'll also need to submit an annual self-assessment form to the HMRC - even if you're paid through PAYE with your employer. The form needs to include all your income, including the salary and any benefits you receive from your day job.

If trading as a limited company, you'll need to fulfill the tax and legal requirements for limited companies including filing annual reports and paying corporation tax. As a director, you'll also need to submit an annual self-assessment form to the HMRC.

Continuing in paid employment

If continuing in paid work while running a part-time business, you may need to tell your employer. This could a contractual requirement, especially if your new business competes in any way with your employer.

Be careful, too, to keep your part-time business separate from your day job. Conducting your own business by making phone calls and sending emails while at work may be a breach of your contract, as is using your employer's supplies and intellectual property without their permission.

Support for part-time businesses

Like any start-up, a part-time business needs support especially when you're ready to take the next step and make it a full time gig. Securing the right funding for your fledgling business can make all the difference and fortunately, there's a wide range of funding options available. Unsecured small business start-up loans, such as those provided by Start Up Loans, are a good bet with lower interest rates compared with high-street banks.

Learn with Start Up Loans and help get your business off the ground

Thinking of starting a business? Check out our free online courses in partnership with the Open University on being an entrepreneur.

Our free Learn with Start Up Loans courses include:

Plus free courses on climate and sustainability, teamwork, entrepreneurship, mental health and wellbeing.

Disclaimer: While we make reasonable efforts to keep the information on this page up to date, we do not guarantee or warrant (implied or otherwise) that it is current, accurate or complete. The information is intended for general information purposes only and does not take into account your personal situation, nor does it constitute legal, financial, tax or other professional advice. You should always consider whether the information is applicable to your particular circumstances and, where appropriate, seek professional or specialist advice or support.

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