Do it yourself

Not all nannies and other childcarers have one employer and one place of work. Some are classed as self-employed and work for various people, often doing different types of work. Many more would like to become self-employed - even as an extra to their day job - but they don't know how to get started. Here are some of the most common questions people ask about setting up their own business and being self-employed.

Do I have to set up a company if I want to be self-employed?

No, you don't. You can simply set yourself up as a sole trader. You don't have to register with anyone, you can just create a name for your business, or use your own name, and there you are! However, you do need to let the tax office know that you want to become self-employed, or want to do some work on a self-employed basis. Phone them up on 08459 15 45 15 and let them know you are going freelance and tell them when you are starting (or when you started). Ask them for your unique tax code, too, as self-employed people pay tax in a different way from employed people. The HMRevenue and Customs website, www.hmrc.gov.uk, has some very helpful information and advice for people wanting to set up their own business.

Do I need to do my own accounts, or should I get an accountant?

Both, actually. It is important to hire a good accountant, as they can save you a lot of money in tax and stop you getting into trouble with the HMRC.

Make sure you get one who is used to dealing with the self-employed, ideally in your field, and certainly one who is recommended by someone else in your line of work.

However, you still need to do some of the accounts work yourself. The more you do, the less you will pay your accountant and the more you will control your own business.

What do I need to do for my accounts?

You need to keep your books. Book-keeping is basically maintaining a record of money coming in and money going out of your account. You can either write this in actual ledger books (buy them at WHSmith, Rymans or any office stationers), or set up Excel spreadsheets or use ready-made IT packages such as Sage or Quickbooks.

Whatever you use, make sure that you put in all the money you are paid each month, and then put in all the expenses you have had that month, laid out in separate columns - including, for example, travel, postage, phone costs, internet, printing fees, office costs and bank charges. Have a look at the www.hmrc.gov.uk website for more information on this.

Keep receipts for everything you spend, too. This is because the more business expenses you have, the more you can reduce your tax bill - you just have to be able to prove you spent the money.

Should I set up a business account?

No, although you should set up a separate, personal account for your business. Don't bother with a proper business account. They are expensive and largely pointless for the self-employed person.

What about tax and National Insurance?

You must pay these yourself. First, you have to pay two lots of National Insurance (NI) contributions - Class 2 and Class 4. You can pay them either monthly by direct debit, or twice a year when you pay your tax bill. Talk to the tax office about how to do it.

Then, twice a year, you will have to pay tax. The bills come in January and July, and they are a horrible shock when they do! So set money aside each month for tax. Set up a high interest savings account (look at www.moneymagpie.com for the best deals) and transfer around 15 per cent of your earnings each month into it to cover the bills.

Will I still be able to get loans and mortgages if I am self-employed?

Oh, yes! Hey, the problem in this country is stopping the banks lending us money, not trying to get it off them. If your credit history is acceptable, it is generally no harder for a self-employed person to get a credit card or loan than it is for an employee. There may be times when a credit card provider comes back to you wanting proof of income, but they usually don't.

With mortgages it is slightly harder when you first become self-employed, but once you have one year's worth of accounts it gets much easier. Also, new products like self-certification mortgages, specifically designed for the self-employed, are offered by all sorts of lenders. So you really don't have to worry!

Jasmine Birtles offers more finance advice at www.moneymagpie.com