Registering yourself as self employed? Read on..

You finally decided to stop working under an employer, and now you are thinking of becoming self-employed. 

While the journey to claiming your designation as self-employed can seem frightening, it surely is delightful at the same time.

Moreover, the simplest way to start your own business in the UK is to become self-employed and to do so, you need to ensure that you’re keeping the law in order.

This article will provide you with all the information you need to be aware of to register as a self-employed.

Self-employed criteria

If you fit the following factors, you’re self-employed.

• Owning and running a business is your full-time job.
• The decisions you make for your business are critical – what, when, and how.
• You have the authority to hire staff.
• You are not entitled to a regular salary.
• Your client base is extensive.
• Your income isn’t taxable under PAYE for goods or services you provide.

If this sounds similar to your work-life, you fall under the self-employed criteria.

How to register yourself as self-employed?

Before registration, you need to decide whether you’re setting up your business as a sole trader or a partnership. 

If you’re vouching for a limited company, you don’t need to register yourself as self-employed as you’re both an employer and an employee of the business.

Sole trader

A sole trader is a person who owns and runs their business as an individual. As a sole trader, you will have complete control over your business, and you won’t have to compromise your ideas by consulting directors or shareholders. 

Also, you become personally responsible for the business debt, and your personal belongings are at risk if you fail to pay the debt on time.

Two ways to register as a sole trader:

You can register as a sole trader online or by post. 

• You can fill out the form online, and if you’re not already registered, sign up and make an account first.
• If you are registering and sending it by post, you will have to fill out the form, print it out, and post it to HMRC.

Partnership

In a partnership, two or more individuals combine resources to form a business, and the losses and profits get shared between them.

Due to the minimal legal requirements, forming a partnership will be easy for you. You and your business partner will be responsible for making critical decisions for their business.

Two ways you can register for the partnership:

• Online form filling
• Fill out the form, print it, and post it to HMRC. You can register a partnership by filling out the SA400 form and the SA401 form to register as business partners.

Now, your self-employed registration is all done. What’s next?

Register with HMRC to notify about your self-employed status

You need to register with the HMRC as soon as you acquire the self-employed title to pay taxes on income earned from your business. 

Here is a simple three steps HMRC registration procedure.

1. Check your eligibility.
2. Register online with gov.uk
3. Complete your registration by using your Government Gateway details and your business information — trading name, contact details, the opening date of your business, your national insurance number, home address, etcetera.

Once the registration is complete, HMRC sends you a letter with the ten-digit unique taxpayer reference (UTR).

As part of this process, HMRC will automatically create an online account for you, which will act as your key to accessing various digital government services.

The registration process usually takes 6-10 days to complete. In case it gets delayed, you can contact HMRC without hesitation.

Decide on your business name

Deciding on a name for your business is crucial as prospects will recognise your business by that name in the market. 

You should thoroughly think and choose a name that stands out among your competitors.

The most important thing to keep in mind while choosing a business name is to double-check that there aren’t existing businesses under that name. 

You should avoid choosing similar business names amid copyright infringement issues.

Fundamental legal obligations to fulfil after registration

As a self-employed person, you need to pay thorough attention to a few responsibilities.

Licence 

You need to get a business license before you start working. You can obtain a license by undergoing training related to your field of work and mastering relevant skills to operate your business.

Once you start the business, you will have to undergo inspection sessions to ensure that your business is legal and well-versed.

Business bank account

As a sole trader, you don’t need to open up a separate bank account, as you are the sole business owner and can transfer the business funds to your personal bank account.

However, if you want to keep an account of your business funds separately, you can go ahead and open a business bank account.

In a partnership model, you must open a separate business bank account from your personal one to conduct business. This account will hold all the funds your business will earn.

Business Insurance

Under UK law, employers’ liability insurance is the only type of business insurance that is mandatory. It is a legal requirement for almost every business with employees, even part-time hires. 

Nevertheless, you may find that regulators require you to have specific insurance to operate. Hence, you should research and get the correct type of insurance for your business.

Self-assessment tax return

As a self-employed person, you need to file a Self-Assessment tax return without fail by 31st January of each year.

If you miss filing a Self-Assessment tax return, the tax department will charge you interest from the due date of the payment, and the interest rate in the UK is 3%.

You should pay tax on time to avoid the interest rate.

National Insurance

In addition to a Self-Assessment tax return, you need to pay two types of National Insurance.

• Class 2, if your profits are more than £6,515 per year.
• Class 4, if your profits are over £9,569 per year.

Your profit gets calculated by subtracting your expenses from your self-employed income. Moreover, you can pay the national Insurance through Self Assessment.

You need to pay national insurance by 31st January and 31st July every year.

Record-keeping

You will be able to file your taxes accurately when you maintain your tax records and documentation properly.

After filling out tax forms, you need to keep your tax records for five years. 

It is possible for HMRC to review those documents at any time, and you can get a fine for failing to preserve them.

Furthermore, you should keep a copy of any relevant documents with you if you damage or lose the original ones.

If you maintain all your business-related documents properly, you can keep track of sales, income, expenses, and payroll if you have employees.

Key Takeaways

The discussion in this article gives you relevant information about how you should register yourself as a self-employed business owner.

You need to ensure what type of business you want to own — Is it a sole trader, partnership, or a limited company?

To submit a self-assessment tax return, you’ll need to keep meticulous records of your income and finances, which may help you budget your business.

After your designation becomes self-employed, you need to pay taxes on time and officially contribute to the economy.

Someone can report you for not registering your business with HMRC. To lay low, you might decide not to advertise your business and be more cautious about whom you tell about your services, and you will end up harming your business.

The best option is to register yourself as self-employed with HMRC to keep your business running seamlessly and efficiently.

Once you are registered as a self employed professional you can choose a merchant service provider and get multiple payment options like a PDQ machine, payment links, or an online payment gateway service.