So you’ve decided to take the leap and set up as self-employed? Congratulations – you’re at the beginning of an exciting journey.
Before you really get stuck in, there are a few things you should have covered. The first is setting up as self-employed with HMRC and, most likely, registering as a sole trader.
Use our how to register as self-employed guide to tick this task off your to-do list.
Get your free in-depth guide which takes you through the process and explains why you need to register as self-employed.
We’ll take you through the process in depth, but here’s a quick overview of how to register as self-employed:
Once registered as self-employed you'll have a number of obligations and responsibilities, like completing an annual Self Assessment tax return.
If you’re self-employed, you have to register with HMRC so that it knows how much you’re earning and can properly collect tax. But how do you know if you’re self-employed?
HMRC offers a tool called the Employment Status Indicator which can help you work it out. However, you're likely to be self-employed if you:
If you meet these criteria you probably need to register as self-employed.
Registering as self-employed is fairly straightforward. Head to the government's online registration portal and enter your email address. Once you're registered, HMRC will send you a letter with your 10-digit Unique Taxpayer Reference (UTR). HMRC will also set up your online account, which gives you access to a range of digital government services.
You’ll also need to decide on a name for your business. Many people choose to trade under their own name, but you could pick one that helps make you stand out.
If you choose a specific trading name, make sure you double check online that there aren't any existing businesses using the same name. This helps avoid confusion.
According to HMRC, you should register at the earliest opportunity. However, there's a deadline – legally you need to register by 5 October after the end of the tax year in which you became self-employed.
For example, if you started your business in July 2018, you'd need to register with HMRC by 5 October 2019.
Ideally you wouldn't leave your registration this late. If anything goes wrong and you're unable to register by the deadline, you could find yourself with a very large tax bill.
Being self-employed doesn’t necessarily mean that you’re a sole trader. If you work for yourself, on your own, you're probably a sole trader – but there are other options.
If you're in a business partnership, you need to register as self-employed, but not as a sole trader. Instead, you should register as a partner. If you set up a limited company, things are a little more complicated. You’ll be an owner of a company as well as its employee. Your tax and National Insurance calculation will also be different.
Once you’ve registered you have a number of responsibilities.
Most importantly you should keep accurate records, particularly of any sales or outgoings connected with your business. Then, by 31 January every year, you should file your Self Assessment tax return online.
Bear in mind that you'll need to make payments to HMRC on 31 January and 31 July, although you may be able to stagger these payments as long as if HMRC agree. As well as income tax, you’ll have to pay both Class 2 and Class 4 National Insurance Contributions (NICs).
If your annual turnover is above the VAT threshold (£85,000 for the 2019-20 tax year), you should register for VAT. However, you may choose to register even if your turnover is below this level. The individual circumstances of your business will determine whether or not this is right for you.
For some people, registering as self-employed might be more difficult. If you or someone you're helping are deaf, hearing-impaired or have a speech impediment, blind or partially sighted, or if English isn't your first language, use gov.uk's additional needs page for help.
There are also services available if you find it difficult to fill in forms, process complicated information or use the internet or phone. Whether this is because of a condition like dyslexia, anxiety or stress, or a disability, help is available.
Self-employed insurance can cover different things, depending on the kind of work you do, and whether you have any employees. Public liability for accidents and professional indemnity for mistakes often make up part of the policy, but employers' liability may even be a legal requirement, if you employ anyone. Check out our FAQ section for a complete, clear headstart.
Have you had a good experience registering as self employed? Found it a bit of a nightmare? Let us know in the comments.
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.Start your quote
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
21 November 2019 • 5-minute read
The self-employed usually need to file a Self Assessment tax return each year. This is true whether you’re a sole trader, are in a business…
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