So, you've decided to go it alone and start living the self-employed life. Congrats! Now it's time for the less fun part.
When you start working for yourself, you'll need to tell HMRC. Yes, even if it's just pocket money, it still needs to be declared to the tax man.
You must register your self-employment with HMRC by 5th October in your business's second tax year. So if you start in December 2016, your business's first tax year is 6th April 2016 - 5th April 2017 and you'll need to register as self-employed by 5th October 2017 or you could be fined.
However, I'd suggest registering as soon as you can after starting your business in case of any issues. As with most tax-related things, this really isn't something you want to leave to the last minute.
Let's get to it.
The application can take a while, so make sure you have about an hour where you won't be disturbed. You will need your national insurance number, contact details and the basic information about your business to hand.
First, you'll want to go to this page on the HMRC website and enter your name, email address and create a password.
This will generate a User ID, which you'll need whenever you sign in to HMRC to file your tax return or pay your tax bill. Make a note of this! I suggest having a spreadsheet with your "official" details on it.
Click "Continue" and you'll be taken to an introduction page. If you're completely new to self-employment, select the second option: "I want to tell HMRC that I am in business and need to register for a new tax or tell HMRC that the company is now active."
The next page will explain the different types of tax you can register to pay and who they are relevant to. For the purpose of this post, we're assuming that you are a sole trader (it's just you) and that you aren't registering for VAT, so self assessment tax is what we're interested in.
You'll then be given some information about the types of business who can't register for tax using this application. Read and check that none of it applies to you and then click "Next".
Then we have even more information about registering with HMRC - read through it and click "Next" again. It mentions a Government Gateway account, which was created for you when you entered your details on the first step. You should also have received an email to confirm this.
Next, select the taxes you need to pay. Pick "Self Assessment (including Class 2 National Insurance contributions)", the second option down.
Pick your business type, which will be "self-employed/sole trader/sole proprietor".
Now you'll be asked some questions about your business, so make sure you have any relevant information to hand.
First you'll be asked the date you started working from yourself. If you're not sure, I'd suggest the date you first started your business, or if you're a blogger/influencer, the date you first accepted a paid job. I wouldn't suggest putting the date you created your blog unless it was started with the intention of making money.
The next screen will tell you what you'll need to continue your application.
Next, you'll be presented with your registration summary. You'll see two sections: "About You" and an "About The Business", with different types of information to complete. You can click the different types of info to fill them in, or simply click next to complete them in order. You can complete and save sections to come back to your application.
- Personal information - this includes basic information about you, your full name, date of birth, etc. It asks for your National Insurance number, so make sure you have this to hand if you don't know it off by heart.
You'll also be asked questions about your residency and whether you work in certain sectors - the likelihood is that you can say no to most of these, but only you know the answer!
The question that confuses a lot of people is "are you working for one person or firm only?" They are referring to your clients, rather than you. If you only work with one client, you may be seen as employed rather than self-employed (you can check the criteria here), but most bloggers and small businesses complete work for different clients, i.e. producing content for different brands.
- Your home address - easy! Enter your postcode and find your address, and the date you started living there. If you've been at your current address for less than three years you'll also be asked for your previous address/es. You can also select "postcode unknown" and enter your address manually.
- Your contact details - enter and confirm your email address (preferably the same one you used at the beginning of the process to avoid any confusion) and a contact phone number.
Once you've completed every section, you'll be shown a summary of all the information you've given. Check that it's all correct and click "next" to continue to the next part.
About the business
- Business details - you'll be asked the date you started working for yourself again, put the same date as you did earlier.
The trading name of the business can simply be your name, or if you have a blog or business name that you're known as, enter that name.
The question about the kind of work you do can be off-putting, especially if you have lots of strings to your bow, which is likely if you're self-employed. It's best to keep it simple and stick with your main job, especially when it comes to relatively new careers which centre on social media. Things like blogger, social media co-ordinator, content creator are good, concise examples.
- Business address - the address you run your business from, either your home address or office, if you work at a different address.
- Business contact details - this section will ask for your business phone numbers and fax numbers. Don't worry if you don't have business numbers, either add your personal contact phone number, or leave these fields blank. Make sure to enter your email address, though. If you don't have a specific business address, use the email address that clients contact you through.
Once you've filled in all your business details, you'll be presented a summary of the information you've given again, check it's correct and click "next" again.
Now you'll be asked to confirm the type of tax you are registering for, the online services you will be enrolled for, and you'll be asked in capacity you're completing the registration, which is "self-employed/sole trader/sole proprietor".
If you're happy that this is correct, tick the box in the declaration section and click "next".
Before submitting your registration, you will need to log in again using the user ID and password which were created at the very beginning.
And...you're done! You should see an acknowledgement screen which states that your application has been submitted. You'll also receive an email to confirm this.
Within the next week or two, you should receive two letters.
One will provide your Unique Taxpayer Reference (UTR). Make sure you keep this safe, and save your UTR somewhere on your computer as well.
The other letter will contain an activation code for the HMRC online services and instructions on how to use it. The code expires after 28 days, so make sure you use it straight away.
So, you're now all registered for tax as a self-employed person! I hope you found this post helpful, as I know some of the information you're asked for can be intimidating and confusing. If there are any other questions you have about this process, please leave a comment below and I'll answer you ASAP.
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