So the big decision has been made and you have decided to take the leap and set up as self-employed. For all small business creators it’s the beginning of an exciting journey, full of dreams and aspirations. But before you get stuck in, you need to consider what accounting services you need and to register as self-employed.
The first question we are normally asked is “Do I need to register as self-employed”? The simple answer is yes, you have to register with HMRC so your tax can be collected properly.
For help and advice with this important first step, you will need to speak to professional accountants in London, so you get off to the right start.
Want to know more about how to register, that’s what we are about to do.
How Do You Know If You’re Self-Employed?
It might sound like an easy question to answer, but not always. You’re likely to be self-employed if you have set yourself up to carry out any of the following business activities.
- Have you decided to fully run your own business?
- Do you want to decide how and when you work?
- Is it likely that you will have more than one customer at the same time?
- Will you be working on the premise that you charge a fixed price for your work, that is agreed with your customer?
- Will you have the option to hire and fire staff?
- Are you going to take responsibility for completing unfinished or unsatisfactory work in your own time?
- Will you be advertising to sell goods or services for a profit?
If you meet these or most of these criteria, you probably need to register as self-employed.
Registering For Self Employment In The UK
Under the HMRC rules and guidance, and with Positive Accountants firm recommendation, once you have made the decision, you should register for self employment at the earliest opportunity.
There is a legal deadline to consider, and under the current legislation you need to register by 5 October after the end of the tax year in which you became self-employed.
We cannot stress strongly enough that you should never leave your registration until this late, as should anything go wrong and you’re unable to register by the deadline, you could find yourself facing a large tax bill.
Speak to professional small business accountants at the earliest opportunity for guidance, advice and help, that will save you money and time.
Let’s clear up one small myth, being self-employed doesn’t necessarily mean that you’re automatically a sole trader. If you work entirely on your own, you’re probably a sole trader. There are, however, other options, such as a business partnership.
You need to still register as self-employed, but not in the sole trader category. Instead, you should register as a partner.
What About A Limited Company?
If you set up a limited company, it’s more complicated. You’ll be an owner of a company as well as its employee. Your tax and National Insurance calculation will also be somewhat different.
Talk to one of our friendly experts in accounting services about setting up a limited company, and they will cover everything you need to know.
Your Responsibilities After Registering As Self-Employed
So now you are registered as self employed, you have a number of responsibilities.
It is very important that you keep accurate records of all your business transactions, particularly of any sales or outgoings connected with your business.
This also includes carefully filing any correspondence from HMRC, or forwarding it to your accountants and bookkeepers, so they can help you to complete your tax return quickly and easily.
By 31 January every year, your Self Assessment tax return has to be filed with HMRC. You are responsible for this, but having a reliable firm of accountants in London to support you, means you will never be late or fall foul of the regulations.
Any payments due need to be made to HMRC on 31 January and 31 July, however it is possible to stagger these payments, as long as you have reached agreement with HMRC beforehand.
The payments don’t end with income tax, as you’ll probably have to pay Class 2 and or Class 4 National Insurance Contributions.
Final Points
A few points that you also need to think about regarding your registration for self employment.
What are you going to call your business? For many new business owners, this is the most exciting start-up task and one that lots of time is spent on. Double check to see whether your preferred business name is already in use, ensuring you avoid any potential legal issues.
If your business is likely to have an annual turnover of more than the current VAT registration threshold, you need to register for VAT. The current registration threshold for 2022 remains at £85,000.
With particular types of business, such as taxi driver, child care, running a public house, there are licences you need to get before you can start working.
Let's Close
Don’t be put off making the leap to being self employed, with professional small business accountants at your side, it’s really straight forward.
Making sure everything is submitted correctly, gets your business off to a great start and you can focus on getting customers and orders.
Let us do the thinking and the hard part, Positive Accountants are here to help the self employed and small businesses of all types.
