Date: 09/04/2018 Author: Marjorie Smith Zago
The complete guide to becoming Self-Employed
If you begin a start-up business or decide to do some extra work on your own you can consider yourself a self-employed person.
As a self-employed, you have to register for Self-assessment Tax Return and National Insurance Contributions (NICs) if you will earn more than £1,000 in a tax year. You will either have to pay Class 2 NICs (£2.80 weekly) when you earn more than £6,025 in a tax year or Class 4 NICs with a 9% on profits between £8,164 and £45,000 or 2% on profits over £45,000.
It is important you learn about the process of registering for self-employment, so we gathered the essential information to get you started.
Am I self-employed?
If one of the categories in the following list applies to you, you certainly are self-employed and have to register with HMRC for self-assessment tax return.
- You work for yourself and are fully responsible for the success or failure of your business.
- You determine what to work on, where, how and when.
- You earn a profit for selling goods and services online.
- You earn a profit for selling goods and services offline (face to face with customers).
- You hire people at your own expense to assist you with your work.
NB: You are not self-employed if you occasionally sell unwanted items or if you own a limited company; instead you are both an owner and employee of it.
What’s in it for me?
Becoming self-employed is the easiest and simplest way to start your business in the UK. This is a very good option if your business is a start-up and you’re looking at keeping risks at a low level.
Check out what’s in it for you:
- You don’t have to pay for company formation costs.
- Hiring an accountant is not mandatory although we advise you to have one.
- Even though you take the total responsibility to do your self-assessment tax return, the paperwork is minimal.
- You can still work for an employer and run your business at the same time.
- You save money.
When should I let them know?
There is no need to register as self-employed as soon as you start but we recommend you do if you will earn more than £1,000 in a tax year so you don’t get all paperwork accumulated. You have to let HMRC know by 5 October of your business’s second tax year.
The tax year runs from 6 April of the current year to 5 April of the following year. To bring some clarity, we give you an example:
- If you started self-employment in January 2018 you were in your first tax year (2017/2018) and registration deadline will be 5 October 2018 which is the second tax year (2018/2019); however, if you start in May 2018 you will be in the 2018/2019 tax year and will have to register by 5 October 2019 which will be the second tax year (2019/2020).
Tell me, how do I register?
There are two ways to become self-employed. Check out which one applies to you and go for it!
1.Previous Self-assessment Tax Return
If you are applying to become self-employed but have previously submitted a Self-Assessment Tax Return (e.g. investment income, property income), complete the CWF1 form. You will need to provide your 10-digit Unique Taxpayer Reference (UTR) from the previous registration.
2. No Previous Self-assessment Tax Return
If you have not previously submitted a Self-Assessment Tax Return, you will have to do the following:
- Click here to create and log into your Government Gateway account.
- Log in to your account with the user ID you received by email, and complete the application.
- Log in to your online account with the activation code from the letter you received by post (NB: the letter is delivered within 10 working days in the UK and 21 abroad). Your UTR number will also be posted to you.
However, If you prefer you can fill the registration form on-screen, print it off and post it to HMRC.