How to Register as Self-Employed?

self employed

Being self-employed is the first step in becoming your own boss and ditching behind all the horrible bosses who you used to work with – or for. Self-employment means that you are going to start your own business and be an entrepreneur who is fighting to gain his/her place in the society. Bringing your idea into action or achieving the dreams which you have once drawn for yourself is just part of what you are supposed to do in order to be self-employed because you still have to register for that. There are some rules or steps which you should pass by in order to be registered for being self-employed and which might differ according to the country you are living in.

How to register for self-employment?

Self-employment might mean different things, of course in all the cases it will be about you working for your own benefits but there are different forms for it. For example, being self-employed might mean working as a freelancer, or it might be about becoming a sole trader; there are actually different forms for it but people never pay attention to them because at the end they all lead to the same place.

Working for yourself means that there are three important things which you always have to do: to register as self-employed, to keep records for your business incomes and outgoings, and to pay your tax each year. The most important step which is the first one; how do you register as self-employed, is considered the most important and the one that would open the doors for you to start the journey.

The rules of registration might differ from one country to another according to the rules applied on its people. But according to the UK for example, in order to register as a self-employed person, you should:

  • First of all register as soon as you start the business

The most important thing about registering is trying to do so as fast as possible in order not to receive any penalties for being late. There was an example given by government’s website which says that if you started your business between April 2014 and March 2015, then you should try to register before October 2015. Professionals say that if the person register later than this period, he/she will never receive a penalty but only if he/she managed to send a self-assessment tax return and pay for the bills.

  • Second, know how to register for self-employed

You should understand that registering for being self-employed differ according to your own circumstances because a sole trader who has not sent his/her tax before will differ from the one who has, and both are different from the former sole trader who wants to start all over again. To make it more clearly to you, we will discuss this part more thoroughly:

  • The new sole trader who has not sent his/her tax returns before will ask the HM Revenue and Customs that he/she wants to be a sole trader by registering for a new business. After that, you will be registered for a self-assessment tax return and Class 2 National Insurance at the same time. After you pass through these stages, you will be able to report your self-employment income through the tax return after the end of each year.
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  • The new sole trader who has sent tax returns before should now register as self-employed and for Class 2 National Insurance because he/she may have already registered for the self-assessment tax return as an individual. Then you will have to use the 10-digit unique taxpayer reference from the time you registered for self-assessment.
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  • The former sole traders who want to start all over again will have to use their unique taxpayer reference (UTR) and register using the same form that those new sole traders who have sent their tax returns before will use.

How to register self-employed?

If you are asking yourself how do I register as self-employed, then you should also ask yourself what should I do to be one. There are some important things which you should know in order to become self-employed. From these things, you will find that:

  • Register with HM Revenue and Customs

As we have just mentioned before, the first step you should take is register with the HMRC within the three month deadline in order to avoid the £100 which you will be fined with. There are three different ways to register; you can register online, call the self-employed helpline, fill a form and register by post.

  • You should decide on a name for your business

Another important thing for self-employment is choosing a name for your business. Although this might be the most exciting part of starting a business, but it is also one of the most tiring ones. Choosing a name means that you have to search whether someone has already taken the name you had in mind to open his/her business or not, because if he/she has, then you should start thinking again and searching for another name. Some people choose to make it more recognizable and easier by using their own names and trading under them.

  • You will be responsible for your own taxes as well as the National Insurance liabilities

Being self-employed means that you will be the one responsible for your own taxes; you will have to calculate them and pay, and that is next to the National Insurance Liabilities. Being responsible for you own taxes means that you have to complete a self-assessment tax return to HMRC every year. Sole traders are also responsible for having to pay for their National Insurance Contributions (NIC); which means that they will have to pay for Class 2 NICs (£2.75 a week), and extra Class 4 contributions which is currently 9% on annual profits between £7.956 and £41.865, and 2% on profits above £41.865.

Some sole traders hire accountants who will help in sorting these numbers out and telling them how much they are expected to pay and even give them some advices on how to pay less. There are also those who make a separate bank account for the taxes from the early beginning to avoid any problems.

  • It is not a must to register for VAT

One other important thing is knowing whether you should register for VAT in all the cases or not. You are not supposed to register for Vat just because you are becoming self-employed and starting your own business, you should only do that if your annual turnover for the business is more than the current VAT registration threshold which is £82,000. You should always pay close attention to how your business is doing because once it passes the VAT registration threshold; you should register in 30 days.

In some cases, it is considered beneficial to register for VAT even if your business turnover lies below the current VAT threshold. From these benefits, you will find that the business is supposed to pay to VAT for all the business purchases it makes which is known as (input tax) and then charge VAT for all the sales it makes which is known as (output tax). If the VAT registered business receives more output tax than input tax, the difference will go to the HMRC, but if the business pays more VAT than it receives, the HMRC will refund the difference.

How do I register self-employed?

After knowing what you should do for self-employment registration, you should now understand some of the important tips that you have to take care of if you decided to be self-employed. From these important tips, you will find that:

  • You should get a business bank account

As a sole trader, your business income will be taxed along your personal tax, but that does not mean that you shouldn’t open your own business bank account in order to keep your business records and finances separate from your own personal affairs. It also looks more professional when your cheques and invoices have your business name and not your personal one.

  • Keep yourself updated with your financial records

Another important thing related to the self-employed people is keeping themselves always updated with the financial records and their accuracy. It is always better for you and your business to keep all your paperwork and all your business transactions under control, because you will then realize how much you are making the tax authorities happy since you will be very accurate about your taxes, but you will also reflect all this on the success of your business as well.

  • Insure your business

Starting your own business means that you will have to have certain insurance policies in your business; first, you will have to know the cover you need which will mostly depend on the type of your business and the type of the industry which you are placed in. Second, you will have to legally take out employers liability insurances where you will need to cover at least £5 million and display your certificate of insurance in a place that can be easily displayed by the employees; those who are not close relatives or family members.

You should also take out public liability insurance if your small business is being visited by customers or if you visit their premises, to protect yourself if a third party injures himself/herself. The last thing is to get yourself insured for professional indemnity if your business is offering people professional services or advice, in order to keep yourself safe if any of those clients decided to sue you if they became unhappy with your service or advice.

Registering for self-employment needs a professional person who will be able to provide you with the right advices and tells you when you are moving in the right direction, because such registration requires a lot of paperwork and tax calculations that should be submitted.  

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