Whatever industry you’re in, taking the leap into self employment for the first time is bound to feel seriously exciting.
It’s true, though, that nothing dampens the thrill of striking out on your own quite like admin. Especially that which is related to the mind-boggling world of tax. But (and it’s a big ‘but’), the anxiety associated with getting your head around the inner workings of HMRC should be relatively short lived when you’ve got the right information to hand.
In this article, we’ll explain the most important first step – how to register as self employed so you’re able to submit a tax return when the time comes.
Who needs to register as self employed?
Pretty much all sole traders – no matter what industry they’re in – need to register as self employed.
The only real exemption is if your sole trader income is less than £1,000 in a single tax year. In which case, you don’t need to register, as this is classed as a casual allowance. Although some people choose to register anyway if they expect this amount to change.
What if I just freelance on the side?
Even if you freelance on the side of regular employment, you’ll still need to register. It’s where you’ll show HMRC the tax you already pay on your regular salary and what you need to pay on your separate sole trader earnings.
Do I register with my name or something else?
It’s up to you. You can use your own name or register a different name for your sole trader business — a bit like a stage name, if you like.
Although, if you want to do that, you’ll need to:
- Make sure it’s inoffensive
- Check that it’s not already trademark registered, and
- Check it doesn’t include the word ‘limited’ in any way, because this marks you out as something different to a sole trader. So that includes Ltd, limited liability partnership, LLP, public limited company, and plc. Just steer clear and you’ll be fine.
The name you choose will go on all official business documents such as contracts and invoices, so make sure it’s something you can live with.
If you want to register your business name as a trademark, so it’s more like a brand, you can apply to do that here.
How do I register as self-employed?
To register as self-employed, all you need to do is to go online and sign up for HMRC services.
Here, you’ll register yourself or your business as a sole trader. You’ll be asked a set of straightforward questions like your name, date of birth, your business’s name, and when it started.
You’ll also be asked to provide your national insurance number, so if you don’t have one, make sure you apply for one here.
You’ll then need to use the HMRC service to register for Self Assessment. This is the process you use to file tax returns each year.
You can also call or mail HMRC to register, but it could take longer this way.
There’s one other thing. If your sole trader turnover is more than £85,000, you’ll also need to register for VAT. You can do that through your HMRC services account, too.
Do you work as a sole trader in construction?
A quick note to sole traders in construction: contractors and subcontractors most likely need to register with HMRC for the Construction Industry Scheme (CIS).
When do I need to register by?
You’ll need to register for Self Assessment by 5th October, in the second tax year you’ve worked as a sole trader.
The tax year runs from 6th April to 5th April.
So, say you started working as a sole trader in March 2020, you’d need to make sure you registered for Self Assessment by 5th October 2020 or you could face a fine.
What happens next?
Now you’re a fully fledged member of the self-employed sole traders club, you’ll need to keep a record of your income and expenses for your Self Assessment tax return each year.
The good news is Finmo is designed to help with just this. Our intelligent technology and easy-to-use app let you categorise your income and business expenses in a streamlined , time-effective way. Using Finmo also significantly reduces the need for holding onto receipts, and helps to keep your taxes super-accurate, so you never pay more than you need to.
Now to get back to the stuff that matters – running your business, without letting stressful admin hog the limelight.