1. Introduction
Becoming self-employed gives you freedom and flexibility, but it also comes with responsibilities. If you’re starting freelancing, contracting, or running your own business, you must sign up for self employed with HMRC. This guide explains how to register, when to do it, and what to expect after signing up.
2. What Does It Mean to Be Self-Employed?
Being self-employed means you:
- Work for yourself rather than being employed by a company.
- Are responsible for paying your own Income Tax and National Insurance.
- Must keep financial records and submit a yearly Self Assessment tax return.
3. Who Needs to Sign Up for Self Employed?
You need to register as self-employed if you:
- Earn more than £1,000 from self-employment in a tax year.
- Work as a freelancer, sole trader, or contractor.
- Run your own business, even part-time.
- Receive income that isn’t taxed at source.
4. How to Sign Up for Self Employed
Step 1: Check If You Qualify
Ensure your income exceeds the £1,000 trading allowance.
Step 2: Register with HMRC
- Go to the HMRC website and create a Government Gateway account.
- Complete the online form to register as self-employed.
- HMRC will send you a Unique Taxpayer Reference (UTR).
Step 3: Keep Business Records
- Record all income and expenses.
- Keep receipts, invoices, and bank statements.
Step 4: Submit a Self Assessment Tax Return
- File your tax return online each year.
- Pay any Income Tax and National Insurance due.
5. Deadlines for Signing Up
- You must register by 5 October following the end of the tax year in which you started trading.
- Tax year runs from 6 April to 5 April.
6. Taxes You’ll Pay as Self-Employed
- Income Tax – Based on your profits.
- Class 2 National Insurance – Flat rate if profits are above the threshold.
- Class 4 National Insurance – Percentage of profits above set levels.
7. Benefits of Being Self-Employed
- Flexible working hours.
- Control over clients and projects.
- Ability to deduct allowable business expenses.
- Opportunity to grow your own brand.
8. Challenges of Being Self-Employed
- Irregular income.
- Responsibility for tax and accounting.
- No holiday or sick pay.
- Need for good financial planning.
Frequently Asked Questions
Q1: How do I sign up for self employed in the UK?
Register on the HMRC website by creating a Government Gateway account and applying as a sole trader.
Q2: How much do I need to earn before signing up?
If you earn over £1,000 per year, you must register.
Q3: Do I need a business bank account?
Not legally, but it’s recommended to separate personal and business finances.
Q4: What records do I need to keep?
Invoices, receipts, bank statements, and details of income and expenses.
Q5: Can I be employed and self-employed at the same time?
Yes, you can have both PAYE employment and self-employment income.
Q6: What happens if I don’t sign up?
You may face penalties and fines for late registration or unpaid taxes.
Conclusion
Knowing how to sign up for self employed is crucial for freelancers, contractors, and entrepreneurs in the UK. By registering with HMRC, keeping accurate records, and submitting annual tax returns, you can stay compliant and focus on growing your business.