Self-employed registration is a basic and necessary step that should be taken by sole traders and business owners in the UK. In countries like the USA and India where self-employed registration is not a legal requirement, the UK’s government provides special provisions for such businesses. Therefore, you should quickly register as self-employed with the HMRC’s official site.
If you are registering a business for the first time, the process might seem complicated. Hence, opting for business accounting services is a decisive decision. But if you are self-reliant and want to know how to register as self-employed, this article can be a one-stop for all your queries.
Self-employed is a term used for people who work for themselves rather than under an employer. This also involves operating a business while being completely responsible for the success and failure of the business operations.
In simple terms, self-employed people work for themselves, either as independent contractors, sole proprietors, or even firm owners, in contrast to traditional employees who have an employment contract.
You will be considered self-employed in the following situations:
Being employed and self-employed is also possible when an individual is employed by an employer and also does freelance work in the meantime.
The whole self-employment registration process is extremely simple and can be summarized in the below-mentioned three steps:
The first step in the process of registering as self-employed is checking whether you are self-employed or not. For tax purposes, HMRC can assist you in deciding if you should be considered self-employed or employed with HMRC’s Employment Status Checker.
Once you are confirmed as self-employed, you can proceed to the next step, which is to create an account on the government gateway website.
It is quite simple to register as a self-employed individual. Just go to the HMRC official website, and you need to sign in using the Government Gateway.
If it’s your first time, you need to sign up on the gateway website. Go to the registration page and enter your email ID. After submitting your email ID, you need to enter the confirmation code that will be sent to your email.
Once you submit your confirmation code, follow the instructions displayed on each consecutive step to successfully receive your Government Gateway user ID.
With the provided Government Gateway user ID, sign in to the HMRC’s website and complete the online self-employed registration process. You will need to provide the following important details to the HMRC:
After completing these steps, a 10-digit Unique Taxpayer Reference (UTR) will be sent to you that will also be used for future tax payments.
Completing an annual self-assessment tax return is one of the many duties and responsibilities that come with being registered as a self-employed person.
Being self-employed doesn’t always mean being a sole trader. A sole trader is one who works for themselves on their own without any involvement in other business. If you are a sole trader, you can’t register as a self-trader. Instead, you need to register as a partner.
For easy comprehension, self-employed include different types of business structures, such as sole traders, limited companies, and partnerships. Therefore, while registering, you need to specify the resemblance to any one of these types.
To register as a self-employed sole trader, you just need to follow the following steps:
The registration and follow-up complete statement filing process could be complex to understand. Hence, self-employed people prefer to opt for business confirmation-statement-filing services, as they update taxes in a timely manner.
These are a few reasons why registering as self-employed gives a plus point to self-employment businesses:
After successfully registering your business with the HMRC, you must follow the following tax responsibilities of the self-employed to stay operational with the compliance set by the HMRC:
One of the crucial responsibilities after registering as self-employed is filing the annual self-assessment tax return with HMRC. This includes evaluating income tax liability after deducting the expenses of businesses.
Profits, which are calculated by subtracting expenses from income, are subject to taxation. If you are not comfortable fulfilling your tax duties on your own, think about using a self-assessment service.
While filing your income tax, you need to keep track of these two significant dates:
If you are registered as self-employed, maintaining a proper record of your business elements, like sales, payroll, income, profit, etc., is a must. Thus, make sure that the required copies of documents like receipts, bank statements, and invoices are always available to you.
All necessary documentation for a given year needs to be retained for five years following the filing of your tax return for that year. This is because you could be punished for not keeping records, and HMRC could wish to check these.
As a self-employed person is responsible for paying income tax, you also need to contribute to the National Insurance Contributions to qualify for certain benefits and the State Pension. There are two following types of NICs:
Self-employed businesses with over £90,000 turnover in a year are needed to register for VAT. This means that you will provide VAT returns to HMRC and charge VAT on your goods or services. You have the option to voluntarily register in order to recover VAT on business purchases, even if your turnover is below this threshold.
While registering your self-employed business with HMRC, you need to make sure not to make the following common mistakes:
The process of self-employed registration is extremely simple and requires only a few steps. Taking such profound steps for your self-employment businesses comes with a lot of benefits as well as responsibilities, mainly associated with income tax. Remember to not make any mentioned mistakes while making an effort to register for self-employment.
