What does it mean to be Self-employed?
- A person who runs their own business (not through a limited company)
- Selling goods or services regularly for profit, i.e., if you are buying and selling products without company structure you would be considered self-employed.
- When you start working for yourself (not through a company or employer) you become a ‘sole-trader’
When to tell HMRC you are Self-employed
You are required to inform HMRC when you are earning more than £1,000 from self-employment between 6 April to 5 April of a tax year i.e. 06/04/2019 - 05/04/2020.
Normally you would register with HMRC as soon as you start trading. This is simply because it’s the easiest way for you, particularly if you know that you will be needing to submit a return. Registering immediately will also allow you to have things ready in time before anything is due from your company. The deadline for registering as self-employed is 5th October in the business’ second tax year.
For example, if you start your company in 2019, you will need to register by 5th October 2020 for the 2019 tax year. This is because the tax year of 2019-2020 will be due by 31st January 2021 and therefore will allow you just under four months before the deadline and before you need to make a payment.
To avoid anything being submitted late, it is recommended you register by 5th October latest, as this will also avoid HMRC issuing a fine if you have not registered by this date.
How to register as a Sole Trader with HMRC
You will need to have a National Insurance Number in order to register with HMRC. Most people will already have a National Insurance number, but if not, you can simply call the National Insurance Number application line.
If you are based in England or Wales, you can call 0800 141 2075. If you are based in Northern Ireland, you will need to contact their help centre directly.
The second step is to register for self-assessment online. If you have already registered to file self-assessments online previously, you can follow the link below which will reactivate your UTR number. It is worth noting that you will only ever have one UTR number, it will never change.
Register for self-assessment with an existing UTR: https://www.tax.service.gov.uk/shortforms/form/CWF1ST
If you have lost your UTR number, you can simply contact HMRC on 0300 200 3310. They will be able to send a reminder letter by post to your home address.
Alternatively, if you have an online personal tax account where you previously filed self-assessment tax returns, your UTR number will be shown there. You can also find your UTR number on any correspondence received from HMRC relating to self-assessments; if this is a letter, you can look for a 10-digit reference number.
If you don’t already have a UTR number, you can follow the link below to register online: https://www.access.service.gov.uk/registration/email
The link will allow you to set up your online tax account at the same time as registering for a UTR number.
Already Registered as a Self-employed individual?
What if you are already registered for self-assessment, but have only ever submitted paper tax returns and now want to do it online? The easiest way to do this is to create an online personal tax account: https://www.access.service.gov.uk/login/signin/creds
Once registered, you will be able to add the self-assessment service to your account and HMRC will send you an activation code by post within 10 working days. After you have received your activation code and used it to log into your account, you can then start filing your self-assessments online.
Other ways to register:
HMRC has a paper form you can complete in your browser. You can print off the form and send it directly to them by post. Just follow these 3 simple steps:
- Go to: https://www.gov.uk/register-for-self-assessment/self-employed
- Find the section at the bottom of the page called 'other ways to register'
- Click the link "fill this form on screen"
Some things to look out for when registering:
- Are you in the construction industry? If you are, you may want to register for CIS. You don’t have to, but it may mean that your deductions from CIS are lower. For example, you could register for the gross payment status if your income is over £30,000 in the construction industry.
- If your business turnover is more than £85,000 in a 12 month period, you will also need to register for VAT.
- Self-employed fishermen must notify HMRC within 3 months of when you first start fishing.
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