How To Register As Self-Employed?

Becoming self-employed means you're your own boss, and it can be an exciting journey, but the idea of dealing with government forms and tax-related matters can sound daunting. However, it's not as complicated as it might seem.

In this article, we'll break down the process of registering as a self-employed into easy-to-understand steps. So, whether you're starting a small business, working as a freelancer, or turning a hobby into an income, we've got you covered.

How To Register As Self-Employed?

Let's begin at the starting point. Why should you even bother registering as self-employed? Well, it's the legal way to let HMRC know that you're earning income outside of regular employment. If you don't, you could end up with a tax headache down the line.

In this section, we'll take you through the process step by step:

Gather Your Information

First things first, you'll need your basic personal information like your name, address, and National Insurance number.

Go Online

Open your web browser and head to the HMRC website; they've made it all digital to make things easy.

Navigate to "Self Assessment"

Once on the HMRC website, look for the "Self Assessment" section; this is where you'll start.

Register for Self Assessment

Click on the "Register for Self-Assessment" button. It will ask for your email address. After that, you'll receive a user ID, which is when you'll need to complete the following procedures.

Once your Government Gateway user ID has been issued to you, you must log in and finish the online self-employed registration process. You will need to provide HMRC with a few essential pieces of information, such as:

• When you first began trading
• The kind of tax (self-assessment) that you want to add
• National Insurance Number
• The nature of your self-employment
• Residence address and phone number

Get Your Unique Taxpayer Reference (UTR)

UTR is basically your tax ID, which you will receive in the mail after you register. Keep this safe; you'll need it for all your tax dealings.

Complete the Self-Assessment Tax Return Online

Now comes the part where you report your earnings and expenses. It's called a "Self Assessment Tax Return." Log in, follow the simple steps, and fill in the blanks.

Deadlines and Reminders

HMRC has deadlines for submitting an online tax return by January 31st after the end of the tax year. For paper tax returns, the submission deadline is 31st October. Set yourself a reminder; you don't want to miss this.

Pay What You Owe

After submitting your tax return, HMRC will calculate what you owe in taxes. Pay up on time, and you're good to go.

Keep Records

It's essential to keep records of your income and expenses for at least five years. This makes everything easier if HMRC ever comes knocking.

Seek Professional Help If Needed

If all this tax information seems a bit too much to handle, tax software like Taxd can assist you in sorting out your self-assessment tax return. Our team of tax advisers and professionals help you maximise your tax efficiency.

Stay Informed

Tax rules can change, so it's a good idea to stay informed and be aware of any updates in the tax laws. At Taxd, we stay up to date with all of the latest tax laws so you can file with the piece of mind that your self-assessment is fully compliant.

That's it! Remember, filing your HMRC self assessment tax return online is a legal requirement, and it helps you avoid future tax troubles.

Why Should You Register as Self-Employed?

In the UK, registering as self-employed is more than just a formality; it is a legal obligation if you make more than £1,000 from self-employment in a given tax year. This level is referred to as the 'Trading Allowance.'

Benefits of Registration:

• Avoid penalties by registering to stay within tax rules.
• Reduce your tax bill with allowed business expenses.
• Record national insurance contributions for future pension access.
• Gain trust with clients and partners.
• Get easier access to business banking and loans. ### Drawbacks to Consider:
• Handle your accounting and taxes.
• Save for taxes and insurance.
• Keep records and file annual returns.
• Understand tax laws and compliance basics. ## Different Scenarios For Registration ### 1. First-time Self-employed

Create a Government Gateway Account

• Visit HMRC's website (www.gov.uk).
• Click on 'Register for self-assessment.'
• Have your National Insurance Number handy.
• Provide personal facts such as complete name, address, and contact information.

Complete registration

• Select 'Register as self-employed'.
• Provide information about your company.
• Answer questions regarding your company activities.
• State your start date.

After registration

• Receive your UTR within ten working days.
• The activation code is sent by letter (typically within 7-10 days).
• Set up your online account using both codes.

2. Previously Submitted Tax Returns

If you've filed tax returns previously:

Use existing credentials

• Log into your Government Gateway account.
• Go to 'Your Tax Account'
• Select 'Add a Tax.'
• Select 'Self Employment'.

Update your information

• Include new business information.
• Specify the commencement date for self-employment.
• Continue using your current UTR.

3. Construction Industry Scheme (CIS) Employees

Special concerns for construction workers:

Standard Registration

• Complete the standard self-employment registration.
• Additional CIS registration is necessary.

CIS Specific Requirements:

• Please provide genuine CSCS card data.
• Register for gross payment status if you are qualified.
• Keep track of all CIS deductions.
• Claim back CIS deductions on tax returns.

4. Managing Dual Income Streams (Employed and Self-employed)

Registration Process

• Register as self-employed while remaining employed.
• Keep detailed records that separate both revenue streams.
• Consider the effect on your tax code.

Tax Implications:

• Combined income may put you at a higher tax rate.
• It may influence tax-free allowances.
• Consider payment on account criteria.

Understanding Your Tax Obligations: Income Tax Bands (2024/25)

Income Tax Brands

• Personal Allowance: £12,570 (0 percent)
• Basic Rate: £12,571 to £50,270 (20 percent)
• Higher Rates: £50,271 to £125,140 (40%)
• Additional Rate: More than £125,140 (45%).

National Insurance Contributions (NIC)

Class 2 NICs

• A flat weekly fee of £3.45
• Payable if profits surpass £6,725.
• Contributes to your state pension.

Class 4 NICs

• 9% for earnings between £9,568 and £50,270
• 2% for earnings exceeding £50,270.

Conclusion

We've broken down the process into simple, easy-to-understand steps so you can get started on your journey to self-employment. However, we know that the process, while manageable, can still be a bit overwhelming. That's where Taxd comes in to make your life easier.

At Taxd, we've taken the complexity out of filing your online UK tax returns. Our user-friendly platform simplifies the entire process. We've made sure our services are affordable for everyone, so you won't have to break the bank.

So why struggle with taxes on your own when you can make it effortless with Taxd? We're here to help you every step of the way.

FAQs

1. Do I Need to Register as Self-Employed with HMRC?

Yes, if you're earning money outside of traditional employment, you should register as self-employed with HMRC. This includes freelancers, sole traders, and small business owners.

2. What's a Unique Taxpayer Reference (UTR), and how do I get one?

A UTR is a unique identification number for tax purposes. After registering, HMRC will send your UTR.

3. When Do I Need to Submit My Self Assessment Tax Return Online?

The deadline for online submission is usually January 31st after the end of the tax year (April 5th). For example, for the tax year ending on April 5, 2023, the deadline would be January 31, 2024. Missing this deadline can result in penalties, so be sure to submit it on time.

4. How Can I Calculate My Taxes as a Self-Employed Individual?

You can use Taxd, a user friendly tax software, to estimate your taxes. We help you determine how much you should set aside for tax payments. Be sure to keep accurate records of your income and expenses to make tax calculations more straightforward.