How did you start out/get going?
Was made redundant, almost immediately had offers of freelance work, decided to give it a shot. Did a couple of years as a sole trader, just coming up to the end of first year as a limited company.
How do you sort the tax bit out and how do you decide how much to declare?
If you're a sole trader you keep simple accounts and declare your profit (essentially revenue - expenses). It's just an extra page on the normal tax return. If you've not done tax returns before it's slightly daunting but actually pretty straightforward. If you're an employee of your own limited company it's slightly more complicated -- you have to have an actual payroll and pay yourself a salary. Your company will pay corporation tax on its profits, you pay income tax on your salary.
How does the vat back thing work?
You charge your clients VAT. You reclaim the VAT element of things you buy for the business. It's quite a lot of paperwork, you have to keep very detailed records and do regular VAT returns. My company is on the flat-rate VAT scheme which is a lot simpler to administer -- each business type has a rate at which they owe VAT, I think mine's 13 or 14%. I charge 20% VAT on all invoices and pay the 13 or 14% to HMRC. The idea is that the rate varies according to how much buying/selling of stuff your type of business typically does, so it ought to work out broadly similarly to the actual numbers if you did traditional VAT and accounted for everything individually.
What do you do about sickness/injury?
Don't get sick or injured.
How does it affect tax credits etc?
It doesn't, really. The tax credits thing doesn't care where your income is coming from, it just cares how much it is.
How do you discipline yourself for putting tax aside?
Every time an invoice is paid I (or rather, my wife, who is also employed by the company partly to look after these things because I'm hopeless) puts a fixed percentage of it (I forget what, but it's quite generous) in a separate account with a view to there being enough money in it to pay the tax bill. Seems to work so far
An accountant is a good idea. We've done nearly everything ourselves thus far, we got an accountant to help set up the company/payroll/etc and we'll probably get him to do all the regular returns and payroll and so on next year -- he wants £70/month at which is good value considering the time it takes us. It's not a ludicrous time overhead, but it's significant. There's also the real-time PAYE thing coming in which will add an extra reporting burden.