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Running a Business While Employed: What You Need To Know

    Setting up a business whilst already employed can seem daunting and a little treacherous. Many people worry about losing the security of their employment and being sanctioned for moonlighting if their employer was to find out.

    However, plenty of entrepreneurs successfully started their own businesses whilst working for someone else. Notable examples include Twitter founder and CEO Jack Dorsey, Salesforce founder and director Marc Benioff, and Spanx founder Sara Blakely. 

    Although it can clearly be done, there are things entrepreneurs need to consider before they rush off and register their business alongside their existing employment. One such area to consider is the legalities surrounding registering your business. 

    If you want to start a side business, the good news is that there are no legalities stopping you from doing so.

    Whilst it can seem pressurising to run a business on the side whilst in full-time employment, thousands of small business owners first successfully started their companies under the safety net of a full-time job.

    That does not mean the process is not without hurdles, however. Here we comprise all the ins and outs you need to know before taking the plunge and starting your own business whilst still employed.

    How do I set up a website?

    You can set up a website in minutes. If you are going to sell a product or a service, you will need a website. For most people, a clean basic website is enough. If you already have a full time job, then finding and hiring designers may not be the best use of your time.

    A really good option to set up a website is to use ready-made templates that come with all the bells and wistles. There are lots of options in the market.

    We use the criteria of simplicity. What is the quickest way that you could set up a website with ZERO technical knoweldge, without hiring anyone while using a reliable service? So basically, how can you get going without being a technical genius.

    Check out Wix. It is one of the world’s best known and easiest services to set up a website in minutes. All you have to do is just fill out the text about your services. You can also set up an on-line shop with Wix in minutes.

    Are there other options? Sure. If you are technical and like DIY, check out They are highly rated, but you will likely need to hire a freelancer to help you manage the site.

    Users love both of the above option. You choose which one is best for you. Now let’s talk about money!

    Do I need a bank account for my business?

    Yes, you need a bank account for your business.

    Whatever you do, you will need to get paid. Ideally, you will separate your business inome from your personal and employment income. There are a number of reasons why you will want a separate bank account or a business current account.

    1. ‘Show me the money’ – you need to know how much money your business is generating outside of your regular employment income. You want to be able to easily look up the number and cash flows. Imagine if you had to go through all your bank statements and separate your monthly employment income from your side hustle business income.
    2. ‘Death and Taxes’ – HMRC will want to make sure that you pay the right taxes on your income. Remember that most of the tax on your full employment income is automatically deducted from your salary. However, with your side hustle business income, you will need to sort this out yourself (or your accountants will).
    3. ‘Expenses, Expenses, Expenses’ – Remember that you can deduct legitimate business expenses against your business income. This is different from your full time employment income, where you can not deduct business expenses (for the most part). Your employer can. For your own business, you really want to track all the business associated expenses. Ideally you do it in a separate bank account so that it is super easy for you (or your accountant) to figure out. It is best practice to use a separate business debit or credit card for your business expenses.
    4. ‘Business partners’ – if you are starting a business with someone else, you want a separate account for sure (even if initially you are spending your own money to get going). Ideally, all the business partners contribute to the business bank account. That way you can have a very clear view of all the income, spending and contribution. Don’t forget to figure out whether you are loaning the money to the business or if you are setting up a new limited company, and getting shares in the business.
    5. ‘Speed’ – You want to be fast opening your business account so that you can get going. Sometimes accounts can take a long time to set up. At we have partnered with Anna Money and Cashplus Bank. Both can set up your business account instantly and get you on your way. Anna Money has awesome Trustpilot ratings and is super easy to use (they will also sort out your invoices and tax tracking). Cashplus is a UK bank and has been around for a while. Cashplus primarily helps UK small businesses.

    If you plan to register a limited company, you can use our quick app and you get an instant bank account. The great news is that when you register a company with then your company registration fee will be refunded when your bank account is opened. That will make your registration free!

    Consider your time

    Starting a business as an entrepreneur is time-consuming and overwhelming, which can make it difficult to manage your work-life balance. You will essentially never be switching off from work, at least, to begin with, so make sure that you are equipped to be able to manage your time and productivity.

    Managing a business on the side while working is no easy feat, but there are options available to you.

    If you can carve out a routine, say working on your business for three mornings a week, and spending the rest of your working week dedicated to your full-time employment, you could approach your employers about a flexible working arrangement.

    Alternatively, if it is financially viable to you, you could request that your hours be shortened to part-time.

    The last thing you want is your full-time employment productivity dropping and jeopardising your position, but likewise, if your current job takes up too much of your time, your new business will never get off the ground.

    Make sure that you are able to either find or maintain a healthy balance that also doesn’t compromise your health, family, and lifestyle.

    Start small

    As we mentioned above, to start a business you will need to carve out time to be able to dedicate toward your new business venture. To do this, like with any company, the best thing to do is start small.

    When building a business while working full time, however, it is advisable to keep your side business part-time.

    Not only does this allow you to adapt slowly to the many changes that come from being an entrepreneur, but it is also a sustainable business model for retaining both dependable income and full time working benefits.

    Growing a business is a huge financial burden for any new business owner, and being in a full-time job whilst starting this process gives the added advantage of not risking savings, or being unable to pay monthly bills.

    When you are starting out, you will also need a great business account to manage your business income and expenses. We recently welcomed Anna Money to MachFast’s partnership program. Anna Money is a great example of a simple business current account that can help you manage invoices, taxes, and expenses. You also get a debit card and they will chase your invoices. We welcomed Anna Money on board because they have a very high rating on Trustpilot and a very useful service.

    Do I need a business insurance?

    The short answer is that you ‘don’t need business insurance’ but it is likely that you should have one. When you are setting up your business, you will likely have customers (unless you are day trading on the stock market). These customers are likely to buy products and services from you. Sometimes things may not work out with your customers or your business deals. In that case, you may want to have some basic insurance in place.

    One example is a basic small business public liability insurance that may offer you protection for certain events. Insurance is a highly regulated market and we can’t offer you advice as to what is the right business insurance for you, but we know the people who can.

    MachFast has found two great companies that can get you the best business insurance protection in the UK.

    The first company is Superscript. They made basic business insurance ridiculously affordable and you can get it in minutes. Just answer a few questions, you get your small business insurance in minutes. They meet our requirements for easy, simple and fast. Insurance is highly regulated, so Superscript are well supervised.

    When you are in full-time employment, your employer likely has various health insurance plans for you. At the same time, you may want to think about Income Protection insurance. It is a special type of insurance for rainy day. You are likely starting a business while employed to generate additional independent income from your full-time employment. Income Protection insurance has a similar role — it may offer protection for rainy day. Again, this is a highly regulated area and you really need to understand what you are buying.

    To help you find a great Income Protection solution (if you want one), feel free to check out Anorak. Anorak is similar to Superscript, but focuses on helping small businesses and self-employed to find the best Income Protection and Health Insurance policies. We liked Anorak’s approach to insurance – educate rather than sell. If you want to understand and potentially get Income Protection insurance, Anorak is a great starting point.

    Understand your employment contract

    Whilst there are no legal limitations preventing you from starting a business while under a full-time employer, your employment contract may have particular disclosures written into it that you need to be aware of.

    If you develop the intellectual property as part of your full-time job, and your new self-employed business will be developing the same products or using similar technologies, there may be a conflict of interest disclosures and non-disclosure agreements that you must obey.

    Additionally, if you have developed something for your own business using company resources and on company time, it becomes the intellectual property of the company which will land you bereft of your work, and in a serious contract breach.

    Some businesses will also go as far as to include non-compete clauses that prevent you from leaving to join a direct competitor, and that allows the company to take legal action against a business of your own creation that they perceive as a direct threat.

    Ensure you have thoroughly read through each page of your contract as clauses such as the ones listed can make the process of starting your own business much more complicated, and that’s before there is the extra complexity of starting a business while working.

    If possible, it’s also best to make sure that your new side business has no links to your current employer. If there are similarities, however, you must be able to prove that the work, research, and ideas are solely yours and that they were developed independently, away from your current employment and its resources.

    Talk with your employer

    Whilst your employment contract may have disclosures, that doesn’t mean that you shouldn’t talk to your current employer and be as transparent as possible.

    If your new business offers no direct competition to your current company, they may come to see you as either a collaborative partner, consumer, or potential client. Any new small business needs a valuable network, and your current place of employment could be the best place to start.

    Additionally, depending on your relationship with the business, your employer could be a potential investor to your startup or have equity in a joint venture.

    If your side business could offer a service to your day job that means they would become a client, partner, or investor, make sure to consult independent legal advice so that you can proceed carefully and correctly before agreeing to terms and conditions.

    Save up your side income.

    Once your side business starts making a profit, it could be tempting to get swept away in the benefits having two incomes can bring.

    This will not be sustainable, and in the long run, could harm your company if you were to leave your full-time position as you may have depleted a fund that could sustain you.

    From early on, set yourself budgetary guidelines that will prevent you from spending beyond your initial means. Choosing to invest or save your profits will help ease your stress when you do become fully self-employed by providing a safety net for the future.

    Pensions and Savings

    The UK government offers very good income tax reductions if you contribute to your pension. Most people do not contribute enough to their pension savings.

    You can get tax relief on private pension contributions worth up to 100% of your annual earnings. The UK government has a fantastic website that explains all the great tax relief benefits.

    The big challenge with setting up a separate pension is the hassle of setting it up – complicated forms, finding a good provider, etc…

    How to set up my own pension?

    Ideally, you can set up your own pension in minutes with a reputable provider. As is the tradition at MachFast, we scoured the UK market for some of the easiest UK pension providers.

    Our criteria for a pension provider are simple:

    1. Is the pension provider backed or owned by a large UK financial institution? You want your money to be as safe as possible.
    2. Is the pension provider easy to use and modern?
    3. Are the pension management fees reasonable?

    There is at least one provider in the UK which meets the above- Wealthify. They are owned by Aviva (one of the oldest UK insurance companies). At the same time, they are a customer-centric tech company. Wealthify has a super easy online pension service. Signing up is easy and you can get done in minutes. You can also set up an ISA (Individual Savings Account) that can be quite helpful.

    Take care of taxes

    When you start a business, whether you choose to become a sole trader or limited company, HMRC must be informed. This is because legal paperwork such as your Self Assessment Form for your tax return can be submitted, and tax generated from any income you earn can be recorded and paid.

    HMRC will also want to assess your business’s intent in order to know whether or not to apply a Badge of Trade. A Badge of Trade is given if HMRC deems a business is being operated in whatever capacity. Factors that make up this decision can include the frequency of transactions, and whether they are regular and business-like in appearance.

    This means if your business receives payment, whether for a completed job or something as small as an advertisement, you will be deemed a business in the eyes of the law so it’s vital to get yourself registered and avoid consequences. Taxes will be a new thing for you when you first start up so it’s important you get to grip with them and avoid common tax mistakes.

    Know when to make the switch

    Once your business is established and there is a clear demand for your products or services, plus your business is making a steady profit – it’s time to take the leap into self-employment.

    The first step to transition your business from its humble beginnings as a side business to a full-blown legitimate company is to register with HMRC within three months of your business’ official start date, starting from when you leave your full-time job and go solo.

    You can choose to either register as a sole trader, or limited company and both have various benefits depending on the size of your company and the work you will be undertaking.

    Limited companies have limited liability, which separates your personal assets from those of the company, protecting them in the event of things going wrong. Meanwhile, if you choose to set up as a sole trader, you require less startup capital to do so, and the entirety of the profits made from the business go to you.

    If you choose to set up as a limited company, you must also register your business with Companies House in an application process.

    Setting Up A Limited Company While Employed

    Companies House Director Registration

    One important thing to bear in mind when forming a Limited (LTD) Company is that information regarding the directors of the company is made publicly available on Companies House.

    This means your information including your name and registered address will be publicly accessible, and could be discovered should an employer, or colleague, ever google you.

    Whilst there are preventive steps you can take to minimise this, examples of which can be found in our blog here: The Implications of a Registered Office Address, it is something to bear in mind if you cannot substitute your real address for a virtual address, or have the name of another director registered.

    Registering with HMRC

    The moment that you begin commencing business activities, you must register as self-employed with HMRC. It does not affect the status of your existing employment which will continue to be taxed by PAYE in the same way.

    Usually, you are required by law to register with HMRC at the point where you start receiving income from your business, but it is advisable to do so when beginning your formation, especially if you will initially be incurring expenses.

    Paying National Insurance Contributions (NIC)

    When in employment you automatically pay Class 1 Employees NIC on your wages. These are deducted from your salary alongside your Income Tax, and your employer then pays those to HMRC on your behalf.

    However, when employed by your own Limited Company, you will then pay Class 1 Employees NIC on any wages you receive from your own company once they go above the primary threshold. At the time of writing the threshold is £183 per week.

    Your company will also be required to pay additional employers’ NIC on wages that exceed the secondary threshold, which at the time of writing is calculated if your profits exceed £6,475 a year.

    Self Assessment Tax

    A majority of the time, your personal allowance (which at the time of writing is £12,500) will be utilised in full against the income you receive from your employment. This means that any profits your business makes will be subject to tax. 

    To do this, you are required to file a Self Assessment tax return annually where you must report the details of your business income and expenses – even if there initially aren’t any to report. 

    On the form you must also include details of your employment income. 

    PAYE Tax

    Tax that you have already paid via PAYE will be taken into account when calculating the tax either payable or refundable at the end of the tax year.

    In the early years of trading, if your expenditure is expected to be more than your income Limited Companies are granted no provisions to relieve the losses against current or prior employment income. 

    Costs relating to business activities will, however, be allowable deductions, for example, equipment costs, travel expenses, and office overheads.

    Unsure whether to be a Sole Trader or LTD Company? Read our top 10 considerations here.

    When Registering as a Sole Trader

    HMRC Registration

    When registering as a sole trader, there is no need to register with Companies House and your details will therefore not be made publicly available.

    Sole Traders simply need to register for Self Assessment with HMRC, here. It is a legal requirement to register if your profits exceed £1,000.

    National Insurance Contributions (NIC)

    If you register as a sole trader, you will pay two types of National Insurance. 

    The first rate will be a flat rate of Class 2 NIC. This means that if your profits are under the threshold for the tax year (at the time of writing the threshold stands at £6,475) then you will be able to apply to be exempt from Class 2 NIC. This won’t affect your entitlement to State Pension, nor any other benefits if you’re also paying Class 1 NIC on your wages.

    The second rate you will need to pay is Class 4 NIC on your business’s profits. However, if you are paying enough Class 1 NIC on your wages you can apply to defer your self-employed NIC.

    Filing Taxes

    As a sole trader, you keep all your business’s profits, but you must pay tax on them.

    Your Income Tax will be calculated on your total earnings, so you’ll be paying tax on both your combined income from your employment and any profits received from your sole tradership. 

    Keep in mind that if your sole trader profits exceed a tax band threshold, you will automatically move into the higher band and pay the higher rates because of the combined totals.

    At the time of writing, the current rates are calculated like so:

    • On the basic income tax rate, you’ll pay tax of 20% on all earnings above your personal allowance (£12,500 at the time of writing) and below the threshold of the basic rate, which at the time of writing is £37,500.
    • On any earnings above the basic rate, you’ll incur income tax of 40% above the threshold unless your earnings push you into the higher rate band, which at the time of writing is £100,000. 

    When preparing your Self Assessment tax return, you will need to disclose the tax you have already paid on earnings from your employer. 

    This is to make HMRC aware that you have already paid tax on part of your total earnings. The amount of tax you owe will be worked out by HMRC once you submit your Self Assessment tax return.

    To conclude

    Lastly, whether you are registering an LTD Company or as a sole trader, it is advisable to check your employment contract.

    Some contracts will have clauses regarding individuals taking on projects or secondary sources of income, and it’s, therefore, important to ascertain whether or not you would be at risk of breaching your contract.

    While any tax affairs and business dealings with HMRC are entirely confidential, Limited Companies must be aware of their information being made publicly available through Companies House. This is where a breach of your employment contract could occur if your employer was to discover the registration.

    At MachFast, we never recommend misleading your employer, even though it is possible to start your own business without the need to disclose this information.

    Ready to register your own business? Want to avoid the paperwork and form-filling that comes with it? Try our app today. Hassle-free business registration in just a few clicks, and immediate access to a business bank account. 

    Register Your Free Company Now!

    Get done in a few minutes and get a free bank account!