ARE YOU THINKING OF SETTING YOURSELF UP AS SELF-EMPLOYED?
Starting to work for yourself? It’s a perfect way to manage your work-life balance. Set your own workload, work in different locations, set your own hours, develop and sell a skill/product that you are passionate about. These are just a few benefits of being self-employed, or as it is often known, a freelancer.
How do you get started? Here is a quick guide from an accounts/ tax point of view with some key things you should do to set yourself up as self-employed and your responsibilities going forward:
- Let HMRC know as soon as you start working for yourself – you can inform them online;
- Register for Self-Assessment by 5th October. You will receive a UTR number – keep it safe;
- Send a Self-Assessment tax return to HMRC every year by the following 31st January;
- You can opt for simplified reporting with simplified expenses;
- There is no need to set up for PAYE with HRMC for your drawings as they are taken out after tax (as they are not an allowable business expense);
- You pay Income Tax on your profits as well as Class 2 / Class 4 National Insurance;
- You are taxed on all of your profit (less some allowable business expenses – see future post);
- You need to register for VAT if your turnover is going to be over £83,000. You can register voluntarily if it suits your business, for example if you sell to other VAT-registered businesses and want to reclaim the VAT;
- Keep records of your business’ sales and expenses – you need to keep records for 6 years;
- If you’re working in construction industry as a sub-contractor or contractor you need to register with HMRC for the Construction Industry Scheme (CIS);
- Chose a name for your business using the same rules as a Limited Company. Your name must be unique. It can’t be the same as or similar to another registered company’s name. It can’t contain a ‘sensitive’ word or expression unless you get permission. Search the Companies House register to see if a name has been taken.
- You can trade using a different name to your registered name. This is known as a ‘business name’. Business names must not include ‘limited’, ‘Ltd’, ‘limited liability partnership, ‘LLP’, ‘public limited company’ or ‘plc’, or be the same as an existing trade mark, or contain a ‘sensitive’ word or expression unless you get permission.
- Then from a reverse point of view, you’ll need to register your business name as a trade mark if you want to stop people from trading under your business name.
- There are rules about how and where you must display your company name ie on all company documents, publicity and letters. You also need to add your personal name on your invoices, stationery and correspondence along with the address where any legal documents can be delivered to you.
Pinnacle are here to help, if you would like assistance with setting yourself up as Self-Employed or Self-Assessment in general, then please get in touch.
We can also help collate and report your annual returns of information to HMRC and Companies House. Remember fines and penalties are imposed for late returns, late payments and mis-information provided.
Remember also that you need to set up your structure before you start trading. Everyone who makes an income needs to make a return to HMRC even if you have no overall taxes to pay.
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