How to Register as Self-Employed and Get Your UTR Number

This simple guide will show you how to register as self-employed and get your UTR number to ensure you're set up for tax purposes.

What is Self Employment? What is Sole Trader?

Before starting the registration process, it’s important to understand what “self-employment” and being a “sole trader” means.

Self-employment simply means that you’re running your own business as an individual and working for yourself rather than being employed by a company. You are responsible for the success or failure of your business and handle everything on your own.

A sole trader is a type of self-employed person. As a sole trader, you own and run your business as an individual, not as a company. This means you’re personally responsible for its operations and finances.

When Do I Need to Register as Self-employed?

If your income from self-employment surpasses £1,000 annually, HMRC requires you to register as self-employed.

Registration serves many functions:

• It ensures fair tax treatment and protects you legally against potential mistakes by HMRC in future tax audits.

• It also helps track expenses related to running your own business, such as taxes due on earnings from self-employment and travel costs.

Steps on How to Register as Self-employed UK

1. Check employment status

Before registering as self-employed, first check your employment status using HMRC's Employment Status Checker tool to make sure if self-employment or another category applies.

2. Gather necessary data

To successfully register as self-employed UK, you will require:

• Full name
• Date of birth
• National Insurance number
• Address
• Phone number
• Details about your work activities (i.e., nature of self-employment work, etc.)

3. Register online

The easiest way to register online with HMRC is through its website. Visit their homepage and search for "register for Self Assessment," followed by clicking on the "Register Online" button. If this is your first year completing self-assessment, select "Register for Self-Assessment." Follow the instructions to set up your Government Gateway account (if necessary).

4. Fill out your registration form

Complete an online registration form with all of your personal and self-employment details as accurately as possible to avoid complications later.

5. Submit your registration

Once completed, submit it to HMRC and wait for their response and further instructions. When HMRC issues you a Unique Taxpayer Reference number, they provide it as part of the registration process to facilitate tax and related obligations.

Next Steps After Registration

Now that you have registered and received a UTR number, there are a few more things to keep in mind:

1. Create an accurate record-keeping system

Accurate record-keeping is important to self-employed individuals. From day one, create an accurate system to track income and expenses, such as a spreadsheet or dedicated tax accounting software.

2. Understand your tax obligations

As an independent worker, it will be your responsibility to:

• Submit an annual self-assessment tax return
• Pay income tax
• Class 2 and 4 national insurance contributions to profits made during the year

Check the tax deadlines here in order to avoid penalties.

3. Consider professional help

Although self-employed tax individuals can manage their taxes independently, some find it beneficial to use online tax software such as Taxd when first starting their businesses.

4. Plan your financial future

Working independently means taking responsibility for your own pension and financial security, so consider setting up a private pension or exploring other savings avenues.

5. Stay updated

Tax laws and regulations can often change, so keep an eye on HMRC announcements.

Avoid Common Pitfalls When Registering as Self-employed

Delaying registration: Register as soon as you begin self-employment to avoid potential penalties.

Misunderstanding employment status: Confirm that you are truly self-employed before registering.

Neglecting record-keeping: Start recording income and expenses immediately.

Failing to keep tax deadlines: Mark important dates in your calendar to stay compliant.

Failing to budget for taxes: Set aside part of your income specifically for tax payments.

Conclusion

Registering as a self-employed tax and obtaining your UTR number is the first step on your self-employment journey in the UK. Though the process may seem difficult at first, breaking it into manageable steps makes the entire experience more smooth. If you’re stuck at any point in the process, consider Taxd for professional guidance.

FAQs

1: After registering as self-employed, how soon will I receive a UTR number?

After registering with HMRC as self-employed, your Unique Taxpayer Reference (UTR) number should arrive within ten working days in the UK or 21 working days for registrations made overseas.

2. Can I start working as a self-employed before receiving my UTR number?

You must register as self-employed with HMRC within three months of starting your self-employment. Your UTR number won't affect your work; however, it will need to be received prior to filing your self-assessment tax return deadline.

3. Should I register as self-employed even though I hold down full-time employment and only do freelance work part-time?

If your self-employment earnings surpass £1,000 annually (known as trading allowance), even if you already hold down full-time employment, it is necessary for you to register as self-employed in order to declare and pay any applicable taxes on this additional income. A self-assessment tax return must be submitted detailing both sources of income.

4. If I miss the 3-month deadline to register as self-employed, what will happen?

Failure to register within three months of starting self-employment could incur a penalty from HMRC, the exact amount depending on how late and the amount of tax due. Therefore, it's advisable to register as soon as possible to avoid potential fines.