How Do I Register as Self-Employed
If you are self-employed, you must handle your own taxes. However, you may be wondering how to register as self-employed. How do you protect yourself and ensure you are registered as self-employed correctly? What is self-employment? Do I need to fill out a self-assessment Tax Return? We answer all of these questions and more in this blog post!
When you work for yourself, you are classed as self-employed. This means you are responsible for your taxes and National Insurance contributions (NICs). Registering as self-employed with HMRC as soon as possible is essential to protect yourself from any penalties or fines down the line. How do you best go about doing this?
In this article, we will look at the following:
- What is self-employment?
- What Are The Business Structures For Self-Employed?
- How do I know if I’m Self-Employed?
- Can I be Self-Employed and Employed?
- When to register as self-employed?
- How to Register as Self-Employed
- Your responsibilities Once Registered as Self Employed
What is Self-Employment?
The term “self-employed” means that someone is their own boss and responsible for their tax and National Insurance contributions. This provides several benefits, including more flexibility in hours and the ability to work from home.
This can include freelancers, contractors, partners and business owners. Registering as self-employed with HMRC as soon as possible is important to protect yourself from any penalties or fines.
What Are The Business Structures For Self-Employed?
As a self-employed individual, you have various structures, including sole trader, freelancer, contractor, and partnership.
Sole Trader
A Sole Trader is the simplest business structure and is ideal for small businesses. As the name suggests, a single person owns and operates the business. Sole traders have complete business control and are responsible for all debts and liabilities.
Freelancer
A freelancer provides services to clients, usually on a project-by-project basis. Freelancers typically don’t have employees or own assets apart from personal belongings. Income and expenses are often tracked on a self-employment tax return.
Contractor
A contractor works on a project-by-project basis and is responsible for completing specific work. They will often work for a client for a fixed period and then work for a different client.
Partnership
Partnerships are owned by two or more partners who control the business’s operations and finances. Partnerships usually require legal paperwork to establish and are subject to the same taxes as sole traders.
How do I know if I’m Self-Employed?
Here are a few things to check to see if you are classed as self-employed:
- You choose your own hours
- Work for several different customers
- Sell goods or services to make a profit
- You are responsible for the success or failure of your business
- Decide how, when and where you work
- Provide most of the equipment to do the work
If you’re unsure whether you’re considered self-employed, use the HMRC tool to determine your employment status for tax purposes.
Can I be Self-Employed and Employed?
Self-employment can be a great way to earn extra money or work on your own schedule. You can usually run your own business and work for an employer.
It is worth checking your employment contract to ensure you are not breaching any of the conditions or asking your employer. Self-employment can significantly improve your career options and earnings potential if you follow the correct procedures.
Being self-employed and employed simultaneously can be a bit confusing when paying taxes. You might wonder how to declare your income and what tax rates you should expect. Here is some advice on how to handle your taxes as a self-employed individual.
You need to be aware that any income you earn from self-employment will be taxed differently than the income you earn from employment. This means that part of your income will be taxed through PAYE, and part will need to be declared on a Self Assessment Tax Return. To avoid overpaying income tax, planning and understanding how these two systems work is essential.
When to Register as Self-Employed?
You must register as self-employed if your annual self-employment income is more than £1,000 in the tax year (6th April to 5th April). If you earn less than this amount, you can still register if you need to prove that you are self-employed or pay class 2 National Insurance voluntarily.
By law, self-employed individuals in the United Kingdom are required to register with HMRC. The deadline for doing so is 5th October after the end of the tax year in which you became self-employed. However, it’s best to register at the earliest opportunity.
An example of a registration deadline is if you started your business in September 2022, you must register with HMRC by 5th October 2023.
Ideally, you wouldn’t wait this long to register. You might have a big tax bill if anything goes wrong and you can’t register on time.
How to Register as Self-Employed
If you do not have a National Insurance number, you must register for one first.
Information Required to Register for Self Assessment
When registering, you will need the following information:
- Full name and any previous names
- Address and date you moved in
- National Insurance number
- Date of Birth
- Gender
- Phone number
- email address
- Details if you have registered previously
If You Have Not Completed a Self-Assessment Return Before
To start the registration process, you must create a Government Gateway account and password. Once you have this, you can sign in to your business tax account. If you do not have a user ID for a business tax account yet, don’t worry – you can create one when you sign in.
Within ten working days, you will receive a letter with your Unique Taxpayer Reference (UTR) number. You’ll need to reference this UTR when you complete your Self Assessment tax return and include it in any correspondence with HMRC.
A reminder is sent before each Self Assessment deadline date that tells you when you need to complete it – so do not panic if, at first glance, there is no mention of completing an online self-assessment form or printing out paper forms!
If you Have Completed a Self Assessment Tax Return Previously
If you’ve previously filed a return but did not submit one last year, you’ll need to re-register online using form CWF1.
If you have forgotten your government gateway user ID and or password, follow the links on HMRC.
Your responsibilities Once Registered as Self Employed
As a new self-employed business, you have responsibilities, which include:
Keep records of your business’s sales and expenses
In the United Kingdom, it is a legal requirement for businesses to keep financial records for at least six years. This helps ensure a clear record of the business’s income and expenses, which can be used in case of an audit. Records should be kept in a safe place where they will be easy to access if needed.
Complete a Tax Return Online Each Year
The Tax year in the UK runs from 6th April to 5th April. It is important to complete a self-assessment tax return each year. The deadline for submitting these is 1st January the following year.
Pay Your Taxes
It is a requirement for self-employed people in the UK to pay their self-assessment taxes.
This includes paying National Insurance, Income Tax and VAT (if registered). See our self Assessment tax calculator to determine how much you might pay in tax and National Insurance.
Other Things to Consider
Business Name
One of the first things to consider is a business name; some people use their own name, while others create something unique.
Business Insurance
As a small business, getting the correct insurance in place is important. If you are not sure what you require, speak to a specialist.
VAT Registration
If the annual turnover for a year is above £90,000, you will need to register for VAT. If it is under £90,000, you can register voluntarily.
Accounting Software
Using a high-quality accounting software program is the most straightforward approach to preparing your accounting. We’ve looked into the best accounting software for self-employed packages.
Limited Company
For most small businesses starting self-employed is the best option; for some forming a limited company is essential. Read our guide on the advantages and disadvantages of a limited company.
Conclusion on Registration as Self-Employed
Registering for self-employment in the UK can be confusing, but it’s important to declare your income correctly and pay the correct income tax and National Insurance.
In this article, we’ve outlined the steps you need to take to register for self-employment as a sole trader or partnership and explained how the process works. If you have any questions, consult with HMRC or an accountant.
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