A guide to setting up a part-time business

Thinking of starting a part-time business? From business plans and having a part-time business at home to tax, insurance and legal responsibilities, here’s how to start a part-time business – at home or somewhere else.

If you’re wondering how to start a part-time business, here’s your pathway to hit the ground running. It could mark a huge change in your career.

How to start a small part-time business

Create a (part-time) business plan 

Whether it’s a shoestring idea or you’re committing to a big life change, having a business plan keeps you focused. It doesn’t need to be complicated at this stage, and you can edit it as often as you need to. Incorporate these headings and you’ll be off to a flying start: 

Executive summary: a super-clear summary, outlining the key points in your business plan. It may seem like overkill but try not to skip this part. An investor or interested party should be able to read it and understand where your business is heading, without reading the full plan. See it as your written-out elevator pitch. 

Business overview: a simple description of your business, how it’ll work and key details. For example, where is your part-time business based? Who’s involved? What’s the product? Is it online or on the high street (or both)? 

Market and competitive analysis: a picture of your target market, where the gaps are and who your competitors are.

Management team, products and services: ‘management team’ might sound a little grand when you’re starting out, especially as a sole trader. But make it clear who’s involved, your own profile and what your products or services will be.

Your plans: from sales and marketing to operations and pricing, set out how you’re going to run your new business and turn a profit. 

Financials: give a run-through of your business’ current financial situation, your plans for growth and how you’re planning to secure funding (if applicable).

Part-time business from home? Get the balance right

Being self-employed, even if it’s only part-time, brings your work much closer to home. Many beginner part-time businesses will run from home, usually at the kitchen table. It’s easy for the lines to blur. 

Try where possible to give your business its own space, and the same for your life outside of work. It might be that both fit together pretty neatly, especially if you’re running a ‘passion business’, which may involve your family, for example, or a hobby you’re happy to give time to. 

But from a corner of the kitchen table to a chair by a window or the garden shed, a dedicated space that signals you’re ready to start work will help. Get your family or housemate’s support for this too, if you’re sharing your living space. 

Location

On the topic of location, you’ll need to check your responsibilities depending on whether you work from home or rent a space. Check out our guide to running a business from home for more on what to do.

You can also check the gov.uk guidance for businesses in rented locations.

If you do decide to buy or rent a location for your business, you may have to pay business rates. Some businesses will get a discount on these, or even pay nothing, so check up and take advantage if it’s the right fit for you. 

You may also be able to claim your location costs as a business expense.

Check your current employment contract

Even if you’re not planning on telling your employer about your part-time business just yet, make sure you check your contract. You may not be allowed to have a part-time business, especially if it’s in a similar sector or there’s a confilct of interest. 

That said, most employers will give you good support around your business, especially if you let them know nice and early. Think back to your interview process when joining them. If you’d mentioned the side project you’re going to give time to, they’d likely admire your work ethic and extra string to your bow. 

But if you want to ask to go part-time in your current job, that’s a different topic. The Citizens Advice flexible working page is a good place to start though, to understand your rights. 

Going full-time

This really is down to one person – you! If your business is going from strength-to-strength and it makes good financial sense, you may start to think about investing all your working time into it. 

It’s your decision – but speak to people you trust, especially those who have been through the same process, or a business mentor. Sleep lots on the decision, avoid fundamental changes in the build up to ultra quiet or busy periods, and ensure your cash reserve is healthy before making the ultimate commitment. 

Finally, don’t burn your bridges. Marching away from your day job gives you five minutes of freedom. But what woud happen if you needed to go back, or look for work in the same sector? Bring your employer on board and keep them close, if possible. 

Part-time business tax

It doesn’t matter how small your business is, or if you’re still working for an employer – you need to register with Her Majesty’s Revenue & Customs (HMRC). 

Check out our article on whether to set up as a sole trader or limited company – a key decision you’ll need to make, and our guide to registering with HRMC

If you’re still employed by an employer, alongside your part-time business activities, you’ll have certain tax responsibilities: 

Tax for part-time sole traders: you’ll need to submit an annual Self Assessment form to HMRC, even if you’re paid through PAYE by your employer. The Self Assessment form needs to include all your income, including any salary and benefits you get from your employer.

Tax for part-time limited companies: the usual tax and legal responsibilities will probably apply, so check up on these with gov.uk. These can include filing annual reports, paying corporation tax and doing a Self Assessment for HMRC if you’re the limited company’s director.

Finances

The most important aspect of part-time business finances is keeping a tight reign. That doesn’t mean being afraid to spend. But have a clear picture every week of your business and personal finances, where the gaps are and the most efficient way of running things. 

At a basic level, a spreadsheet with your all your taxable income and expenses, money put aside to pay your tax, and ideally a business bank account will help you stay organised. If finances really aren’t your thing, or you don’t have time, outsourcing this to a small business accountant (there are some great online ones) can take this off your hands. 

Legal requirements for part-time businesses

Along with tax, finances and location, plus your employment contract, what are the legal requirements for starting a part-time business? 

You may need to look into licences or permits, depending on your business type, as well as insurance (see below). There are also specific rules for businesses selling goods online, buying or selling outside the UK and storing or using personal information, under the General Data Protection Act (GDPR). 

Part-time business insurance 

Whether you’re just starting out or are looking to grow, part-time business insurance can be very helpful. A typical policy will cover you against everyday business risks, from mistakes and propert damage to a customer getting injured. 

You may be legally required to have insurance if you’re an employer, or if you use vehicles as part of your activities. You may also need specific insurance if your business is regulated or part of a professional body.

Let us know how you get on with setting up your part-time business in the comments below.

Looking for self-employed insurance?

With Simply Business you can build a single self employed insurance policy combining the covers that are relevant to you. Whether it’s public liability insurance, professional indemnity or whatever else you need, we’ll run you a quick quote online, and let you decide if we’re a good fit.

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