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Becoming self-employed: Guide for counsellors and therapists

Are you thinking about moving from the NHS and taking the plunge into independent practice?

Therapists today have so many different options for how and where they want to work. A therapist (counsellor, psychotherapist and clinical psychologist and the like) can choose to work outside of traditional employment settings such as the NHS and education.  You can find self-employment opportunities by working with established private clinics or starting your own private practice business. You can even join an online therapy “app” to provide services to clients over text and video.

Setting up in private practice

You may work from an office at home or at a clinic, and your income is the fee which clients pay for your service.  You are your own boss and can decide how to run your practice. You decide which clients you see, what fees you charge and you can specialise in a particular therapeutic approach.

There are various kinds of ethical difficulties that could crop up specifically in private practice. These include challenges relating to marketing your services, dealing with clients who don’t pay and maintaining your work-life balance.

Private clinics and employee access programmes

Working in partnership with insurance companies, employers and the NHS, private mental health services can provide you with a stream of client referrals for an agreed hourly rate.

Working with an established business means a built-in referral stream, meaning it won't take long to get clients and build your way to a full caseload. They can also provide administration and billing support so you won’t have to worry about chasing clients for fees. However, you’ll have less autonomy over the types of clients you see and the hourly rate you receive will be lower than in private practice.

Therapy “apps” are growing in popularity thanks to developments in digital technology. They offer instant access to video, email and text-based therapy. They can provide a convenient way for therapists to top up their income, but the hourly rate paid to therapists is often considerably lower than the average fee charged in private practice. Therapy Today carried out a comprehensive review into the growing number of ‘instant access’ therapy platforms.

Many therapists decide to carry out private work alongside employment in other sectors such as the NHS, education and charity. Whichever route you choose, there are some basic first steps you’ll need to take on your way to becoming a self-employed therapist:

Five steps to becoming self-employed

  1. Step 1 - Choose a legal structure
  2. Step 2 - Get a dedicated bank account in place
  3. Step 3 - Workout how to keep business and finance records
  4. Step 4 - Set up the right business insurance for being self-employed
  5. Step 5 - Organise your workspace.

Read on for more information about what you need to do for each step.

Step 1 - Choose a legal structure

The most common options are being a sole trader or a limited company. But, what's the difference between the two?

Sole trader

If you’re just starting out, a sole trader route is probably one of the best business structures for you. The main advantage is simplicity – simplified accounts, fewer statutory obligations and tax allowances. However, your personal assets are at risk if debts become unmanageable.

Gov.uk provides simple steps on their website for you to set up as self-employed.

As a sole trader, you’ll need to register as self-employed with HMRC for payment of tax and national insurance. You’ll need to keep records of business income and outgoings and to pay tax each year, usually in 6 month instalments.

Limited company

Registering a limited company requires a little more work, and involvement from other parties. You’ll need to identify a Secretary at the least, although this can be provided by Companies House.

However, there are advantages to being a limited company. You won’t be held personally liable for debts accrued should you have to wind up your business in the future. A limited company is a form of business organisation where the company has a separate legal identity from its shareholders and directors.

In general, limited companies tend to be more tax efficient than sole traders, as they pay corporation tax on their profits instead of income tax.

Gov.uk provides advice on setting up a limited company. You should consider engaging an accountant. The different elements of documentation required throughout the year for a limited company outside of your own self-assessment submission can be overwhelming. They can also help set your business up.

Step 2 - Get a dedicated bank account in place

Once you start running your own business, it’s important to spend time ensuring your finances are in order and set up correctly to support you, your family and lifestyle.

A business bank account operates similarly to a personal current account. You can use it for transactions such as receiving and sending money, setting up recurring payments, paying for goods and services online and in-person, and more.

The main difference is that business accounts usually charge a monthly fee.

Step 3 - Organise how to keep business and finance records

As a therapist working in private practice with clients discussing mental health matters, you’ll collect and store personal and sensitive data (physical and/or mental health details). This means you’ll need to be up to speed on data protection laws and regulation.

GDPR sets out the main principles of data protection and the responsibilities organisations have when handling personal data. It protects individuals’ personal information and improves their control over how it’s collected, stored, shared and used. All businesses (including sole traders) that process personal information electronically must register with the ICO and pay a fee. Register on the ICO website.

Step 4 - Get business/ self-employed insurance

As a practising therapist, it's important to choose the right insurance policy to ensure both you and your clients have adequate protection.

Insurance will cover you for things like:

  • Complaints about the advice or services given.  A dissatisfied patient may complain for a number of reasons, and in many cases, the therapist failed to ensure their patient understood the therapeutic process, and what it would involve.
  • Alleged breach of rules or regulations of the professional body. A patient might feel you have breached the rules and regulations of your professional body, or have not upheld standards expected by the profession.
  • Breach of confidentiality. Claims can arise from alleged breaches in confidentiality, or even the mishandling or loss of documents/personal sensitive information.

As a minimum requirement, your policy should include public liability and professional indemnity cover.

Public and products liability is the insurance that deals with your liability for causing bodily injury to people or damage to property due to an accident caused by your negligence. For example, your client tripping and falling in your home or workplace.

Professional indemnity/malpractice covers claims arising from your work as a therapist. Professional indemnity insurance claims explained for therapists.

Other covers that you may consider as a therapist include:

  • Cyber insurance
  • Directors and officers liability
  • Office and contents insurance
  • Employers liability insurance
  • Home insurance for working from home.

Step 5 - Organise your workspace

Work spaces for therapists come in all shapes and sizes. Where you practice will depend on your client base, budget and location.

Here are your typical options:

  • Home office ‒ This is the cheapest option if you live in a property which lends itself to home-working. Disadvantages could include intrusiveness into home life, unexpected disturbances from family members, visitors or pets. You’ll need to find a dedicated clutter-free counselling room where your clients will feel comfortable. You’ll also need to make sure your counselling insurance includes public liability for people whilst on your premises.
  • Sharing an office location ‒ Team up with one or more colleagues and rent out one premises, allocating their operating hours to certain days. This could offer an efficient way of accommodating your therapy business with the added advantage that you can cross-promote each other if you work in different disciplines.
  • Rented individual office ‒ This may be a more expensive option so think about your first year’s expected income and projected costs. Seek a short-term lease where possible so you can move if needed. Things like noise from neighbouring buildings or traffic may be a deal-breaker if you require a peaceful environment to practice and may not become apparent until you’re locked into your rental agreement.
  • Pay by the hour ‒ Rather than lease a space, you can opt to rent therapy office space by the hour. These hourly leases usually come with all the furniture and fittings you need, and you only have to pay for the time you use.

Next, you’ll want to look at the equipment you need to run your practice. You’ll generally need a telephone or mobile separate to your personal number, a laptop or desktop computer, a printer/copier, internet access and business stationery.

Support for self-employed therapists and private practitioners

Private practice can be a lonely occupation, especially when working from home. Professional bodies offer support such as British Association of Counselling and Psychotherapy (BACP), BABCP, BPS, UKCP.

Social media is a great place to get support from peers – look for private practice groups on Facebook or LinkedIn.

Business development advice is often available from a variety of sources including borough councils, banks and local business clubs, or even via your own networks. You can contact the government’s Business Support Helpline on 0800 998 1098 for free advice. You can find free support, advice and sources of finance through your local ‘growth hub’. Advice for start-up businesses is also available on the websites of the Federation of Small Businesses (FSB), The Prince’s Trust and the Confederation of British Businesses (CBI).

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This is a marketing communication. The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only.

The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such. Statements concerning legal, tax or accounting matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.