Being self-employed may seem like a break away from the rat-race, one that frees you from the trials and tribulations of the 9 – 5, but there is more to becoming your own boss than simply throwing the towel in with the day job. If you don’t register as self-employed, you may find yourself facing hefty fees concerning unpaid tax on your income. Here is Square’s handy guide on how to register as self-employed, take care of all the admin and enjoy being your own boss.
Who Needs to Register as Self-Employed?
Anyone who wants to work for themselves, either full time or just as an extra source of income, will need to register as self-employed with Her Majesty’s Revenue and Customs (HMRC) in order to pay income tax and National Insurance contributions.
If you’re unsure if you count as self-employed, the gov.uk website provides simple ways to figure out if you fall into this category or not.
Why do I need to register as self-employed?
Anyone who wants to work for themselves, either full time or just as an extra source of income, will need to register as self-employed with Her Majesty’s Revenue and Customs (HMRC). If you’re unsure whether you count as self-employed, the gov.uk website provides simple ways to figure out if you fall into this category or not. In general, it is usually defined by a combination of the following:
- You run a business – either solo or in a partnership – that provides a service or sells goods for profit.
- You take responsibility for its successes and failures.
- You have multiple customers at one time.
- You choose how, where and when you work.
- You can hire employees to help complete the work.
- You provide the main equipment to do your job, such as tools, tech or software.
- You charge a fixed price, as agreed with each customer.
Do I need to register as a sole trader?
This mainly depends on the type of business you are setting up. If you are running your business alone and earned more than £1,000 from self-employment in a tax year, then you are considered a sole trader and will need to register your business as such. This will ensure you can keep all your business’ profits after tax is paid on them, though you will also be responsible for any losses. Follow the gov.uk instructions to set up as a sole trader.
However, if you are in a business partnership where the company’s profits and losses are shared between multiple owners, then you don’t need to register as a sole trader. You will need to register as a self-employed partner instead.
Self Employment and Tax
Being self-employed means you need to complete your own Self Assessment tax return, to do so, it’s best to register for HMRC online services and complete this online. Tax returns must be made even if you have no taxes to report. Late returns will be fined so it’s also important you keep track of the key dates in the year, the most important being:
5th April, the end of the tax year when you can send the tax return for the whole year just elapsed
5th October, the date in the second year (first if you have been self-employed before) since you started working as self-employed that you need to be registered by
Many self-employed individuals like to employ an accountant to help deal with the financial admin that comes with being a sole trader or being your own boss, so this is something worth considering too.
How to Register as Self-Employed: Step by Step
Registering as self-employed online is simple and provides you with a Unique Taxpayer Reference (UTR) and enrols you for paying self-assessment taxes online.
1 - Register for a “Government Gateway” account
This will be your online account where you can pay your taxes and manage the general financial admin of your business. To register you must supply an address, email and your full name.
2 - Add a tax
Once logged in, you will see the option to “Add a tax, duty or scheme”. You should select “Self Assessment” and add the date you started training.
3 - Add your details
HMRC will require some personal details about you, the account holder. These include home address, National Insurance number, contact details and the name of who you work for – this will simply be you as you are now self-employed.
4 - Add details about your business
This can be as simple as your job title in the case of something like “plumber”, so long as HMRC can understand the nature of your self-employed work from your answer.
5 - Submit your request
Hit submit! You’ll receive a UTR and confirmation of your registration in the post, meaning from a legal admin side, you’re all good to go.
If you have previously sent a self-assessment return you will need to complete a CWF1 form, this will allow you to register as self-employed while maintaining the same online account as you previously created with HMRC.
Do I need to register for VAT?
Now you’re self-employed you also need to think about Value Added Tax (VAT) on goods and services you use.
You will only need to register for VAT if your turnover is more than £85,000, although you can voluntarily register if your turnover is less, as this will allow you to reclaim VAT.
Our handy VAT guide can get you up to speed with precisely what VAT means.
Tools to Help You Work for Yourself
Once you’ve registered as self-employed with HMRC, there are many business tools you can use to make working for yourself as easy as possible.
If you’re looking for an easy and affordable payment device, the Square Reader is a great starting point at just £16. It’s powered by our Square Point of Sale (POS) app, so you can easily manage your business on the go.
For those starting a service-based business, such as an at-home salon or personal trainer, you can use a tool like Square Appointments to organise your day, create individual profiles and let customers book online. Similarly, our Invoice software is ideal for freelancing as it lets you send out digital estimates and invoices to clients. Whatever your small business needs, Square has the solution.
This post provides information to help you get started, but you should seek the advice of a legal or financial expert for your specific needs.