Running Your Own Business While Still Employed: All Considerations You Should Know

There are lots of reasons why someone might consider running a business while working full-time in the UK. Perhaps they want to work on a passion project during their free time. Perhaps they hope one day to run their business full-time but need financial support from work to get it off the ground. Or perhaps they simply want to run a side business to make a little extra cash. 

Whatever the reason, there’s nothing standing in the way of you opening up your own company while employed if that’s something that would interest you. It’s even possible to open a business in London by a foreigner! In this article, we’ll discuss whether you should run a business while employed in the UK, and will also consider the legalities of doing so.

Should You Start Your Own Business While Working Full Time?

There are loads of people out there who are interested in running their own business while in full-time employment—but the sensible among them will pause to consider whether they should.

One of the first things to consider is whether it’s actually feasible for you to run your own business while working, making sure to take your work/life balance into account. How much time will your start-up require? And can you spare that time while working? There is always the option of starting small and gauging how business is first, expanding later if you have the time and means to do so.

You should also ask yourself whether the new enterprise you’re considering breaks any disclosure agreements in your employment contract. If you develop a product during work hours using company equipment, you can end up heavily penalised. Therefore, it’s important to make sure that, whatever your side business is, it is absolutely distinct from your employment. There should be no doubt that you developed your product completely independently.

Is It Legal to Start a Business While Employed?

If you’ve fully considered the matter and have decided you’d like to go ahead with setting up a side business, then the next thing you have to consider is the legalities of doing so. You may wonder: is starting a business while employed legal in the UK?

The good news is that starting a side business while employed is completely legal here in the UK. Not only is it completely legitimate, but it is also a highly popular option for many employees. That being said, as mentioned in the previous section, you should make sure that your business idea doesn’t break any disclosure agreements or intellectual copyright laws.

Some employment contracts compel you to inform your employer about having a second job, whether you’re starting a business of your own or taking a job on the side. If your company idea is a direct conflict of interest with your current place of work, it could be considered a breach of contract. It’s important to keep this in mind, since breaking your contract could get you fired or even slapped with a lawsuit. 

Tax Implications of Running a Side Business While Employed

As well as considering the legalities of starting a business while employed, you should also consider the tax implications. In this section, we’ll break down everything you’ll need to think about when building your own company.

Registering with HM Revenue and Customs (HMRC) 

Regardless of the size of your company, you must inform HMRC about it. It doesn’t matter if you’re working as a sole trader, within a partnership, or are running a team of employees; HMRC must be notified.

If you’re planning to set up a limited company, you’ll need to register the business with Companies House. This can be done directly with them via post or online, or you can choose to go through an account or company formation service. Once you’ve registered, Companies House will get in touch with HMRC to let them know your business is up and running.

Finally, if you’re looking to hire workers for your business, you’ll also need to register as an employer and notify HMRC that you will be filling out employer Self Assessment forms.

Filing Tax Returns

If up until this point you’ve only worked as an employee, it’s likely you’ve never had to fill out tax returns yourself—but this will all change when you start running your own business! Your tax return must include all the income you make, both from your start-up and your employer.

When running a limited company, you will also be required to complete documents recording the salary you receive from your company, as well as any benefits you receive or expenses you are paid back by the business.

If you’re a sole trader, you will be expected to fill out self-employment papers. In the event you run more than one company through the solo trading model, you will be required to fill out self-employment tax papers for each individual company.

Making National Insurance Contributions (NIC)

As an employee, a portion of your wages goes towards class 1 employees’ NIC, with your employer paying HM Revenues and Customers for you. Similarly, when you start up and are employed by a limited company, you will still be required to pay class 1 employees’ NIC, but only if you are paid above a certain amount.

Sole traders may pay two different types of NIC. This includes a flat rate paid annually, called a class 2 NIC. However, you may be exempt from paying this rate if your company makes under a certain amount for the year. In addition to paying class 2 NIC, you will also have to pay class 4 NIC on your company’s revenue

Can You Be Registered as a Sole Trader and Be Employed?

It is entirely possible to register as a sole trader and be employed, provided your business does not go against any of the conditions set out in your employment contract. This means your business can’t be a conflict of interest, and no products or services you sell should infringe upon any relevant intellectual copyright laws.

Assuming your business idea does not breach your contract, you have nothing to worry about if you want to be a sole trader and be employed at the same time. That being said, you should still let your employer know about running a side business while employed. Being upfront and transparent from the beginning will eliminate certain confusions and complications down the line, making it easier for you to perform both in your day job and as a sole trader. Don’t forget to take care of a business address for self-employed as well. 

How to Be Employed and Have a Limited Company

Likewise, you can be employed and have a limited company, as well. The same rules apply here as with sole trading and every other type of business model. Namely, ensure that your business idea does not infringe upon your contract. Otherwise, you could lose your job and could even be sued by your employer.

Wondering about the process of company registration? Our article explains How to Register a Company in the UK in simple terms.

Consider the Hoxton Mix Your Trusted Partner 

Starting a business, even if you’re not already employed, is a veritable minefield. With so many factors to consider and so many moving parts to keep track of, running your own start-up can be daunting and confusing — especially if you don’t have prior experience in building companies. 

Opening a business while you are already in employment only adds another layer of complexity. While this course of action is perfectly legal, you still have to make sure that you’re not at risk of breaching your contract. 

Here at the Hoxton Mix, we can help you keep track of all this and more, greatly simplifying the business formation process. As well as offering you to rent a business address, we can also provide you with sound business advice and assistance. We can also help you make sure you have all your documents in order, saving you time and stress.

To find out exactly how we can help run a business while employed in the UK, get in touch today!

Final Thoughts

Starting a business while employed in the UK is legal but is not without its complications. There are legal implications to take into consideration, including a business trading address, tax matters to contend with, and more besides. If you have made the decision to start your own company while already in employment—whether to make some money on the side or to follow a long-held dream—Hoxton Mix would love to help you get started.

FAQ

Can I start running a business while working full time in the UK?

Legally, there is nothing stopping you from starting a business while working full time in the UK. It is perfectly legal and legitimate to have a full time job and be self-employed at the same time. In fact, it is a popular way to make a little extra money.  All that being said, you should fully consider the practicalities of the matter before jumping in at the deep end. Think about how much time you will need to run your business, and consider what sort of resources you will need to have access to. Will you feasibly be able to balance this with the commitments of a full-time job?

Can I be employed and have a business?

Again, legally, you can start a business while working full time in the UK. Make sure, however, that you carefully review the details of your employment contract before getting started. Some companies dislike it when you find work elsewhere, particularly when that work presents a conflict of interest. If you break the terms of your contract, you could end up being fired or even sued. So, you should make sure that you pay close attention to the wording of your agreement.

Is it legally okay to start your own start-up while working for another company?

By law, you are allowed to run a start-up of your own while under the employ of another company. That being said, depending on your contract, if your company presents a conflict of interest with your day job, you could end up in trouble with your employer. It would be best if you also were careful that you don’t breach any intellectual property laws with your new business. Make sure that whatever service or product you provide is clearly separate from your day job. For example, if you design a product using your employer’s equipment or materials, or even if the design is made on company property, you could end up in legal trouble.

Do I need to tell my employer if I start a business?

It is best practice to let your employer know if you start your own company. Ideally, you will have already made sure that your business does not break any conditions set out in your contract, meaning you can avoid any potential conflict breaking your agreement might cause. Nonetheless, for the sake of transparency and out of respect for your employer, it is still for the best to let them know. In all likelihood, they will find out at some point anyway; no doubt the news will be easier to hear from you than from a third party.