If you’re planning to start your own business in the UK, it’s important to understand your tax obligations. As a self-employed individual, you will be responsible for registering with HM Revenue and Customs (HMRC) and paying your own taxes. Here’s what you need to know about registering as self-employed for tax in the UK.
Who needs to register as self-employed?
You need to register as self-employed if you earn more than £1,000 from self-employment in a tax year. This applies even if you already have another job and are paying taxes through PAYE. If you’re unsure whether you need to register, it’s always best to check with HMRC.
How to register as self-employed
To register as self-employed, you need to follow these steps:
- Go to the HMRC website and register for self-assessment. You will need your National Insurance number and contact details to complete the registration process.
- Once you’ve registered, HMRC will send you a Unique Taxpayer Reference (UTR) number. This is a 10-digit number that you will need to keep safe as you will use it to complete your tax return each year.
- You will also need to set up a self-assessment online account with HMRC. This will allow you to complete your tax return and make payments online.
- Keep accurate records of your income and expenses. This will make it easier to complete your tax return at the end of the year.
When to register as self-employed
You should register as self-employed as soon as possible after starting your business. You have until 5th October after the end of the tax year to register, but it’s best to do it as early as possible so you have time to get everything set up.
Once you’ve registered, you will need to complete a tax return each year. The tax year runs from 6th April to 5th April the following year, and you have until 31st January following the end of the tax year to file your tax return and pay any tax owed.
What taxes do you need to pay as a self-employed person?
As a self-employed individual, you will need to pay two types of taxes: income tax and National Insurance.
Income tax
You will need to pay income tax on your profits. Your profits are calculated as your income minus your allowable expenses. Allowable expenses are expenses that are incurred solely for the purpose of your business. Some examples of allowable expenses include office rent, travel expenses, and equipment costs.
National Insurance
You will also need to pay Class 2 and Class 4 National Insurance contributions (NICs) on your profits. Class 2 NICs are a fixed weekly amount, while Class 4 NICs are a percentage of your profits.
It’s important to keep accurate records of your income and expenses so you can calculate your tax liability correctly. You will need to complete your tax return by 31st January each year and pay any tax owed by this date.
In conclusion, registering as self-employed for tax in the UK is a straightforward process, but it’s important to understand your obligations and make sure you comply with all the relevant rules and regulations. By registering as self-employed, keeping accurate records, and paying your taxes on time, you can avoid penalties and ensure your business is compliant with HMRC regulations.