Like a lot of parents, I’m super busy and don’t have time to trawl the Internet researching a topic, let alone understanding it in my sleep deprived brain fug. So I’ve done the work for you, condensing topics down to the essentials you need to know plus more detail if you need it.
Registering as self-employed and for self assessment
Becoming self-employed can be a scary prospect, especially if you have spent most or all of your working life in employment. It’s actually very straightforward, once you have the basic requirements set up then you’re good to go. It does require some discipline, but if your transactions are simple then you should be able to do most of the work yourself.
What You Need to Know
- Register yourself as self-employed with HMRC and register for self-assessment (declaring your profits)
- Your self assessment return needs to be filed online by the 31st January
- Tax and National Insurance payments will become due on the 31st July and 31st January each year
- Keep your Unique Tax Reference in a safe place as you will need it regularly
In More Detail
You can register yourself as self-employed even if you are already in employment elsewhere, and you can be trading as self employed under more than one business name.
HMRC requires you to register for self assessment if you are going to be earning more than £1,000 from self-employment in a tax year. Tax years run from the 6th April to the 5th April in the following year. You must register by the 5th October in your second tax year otherwise you may be fined.
If you are not going to be earning this much, it can still be useful to register as self employed (and for self assessment) because it will impact on other aspects, such as eligibility for the 30 hours free childcare and tax free childcare (which have to be reconfirmed every three months).
Register as self-employed
You can register yourself as self-employed on the HMRC website (see below). To do this, you need to create a Government Gateway account, which gives you online access to all your services. The first stage is to initiate the account and then you will be sent an activation code in the post, which you enter online to finish creating your account. The good thing here is that when you create your account, you will be registered for self assessment at the same time. Your Government Gateway account for self assessment will be different to the one you may already have for childcare support (don’t ask me why!)
You will be sent a Unique Taxpayer Reference (UTR) number separately from the Government Gateway letter. This is useful for many reasons, not least when you have to reconfirm your eligibility for childcare support, as you will need to supply this number.
Returns and Payments
The self assessment return needs to be filed online by the 31st January after the end of the tax year (eg. for tax year ending 5th April 2018, your self assessment deadline is 31st January 2019). You can complete your return at any point after the end of the tax year.
You will need to pay the balance of any tax and National Insurance due by the 31st January as well, so it makes sense to file your return earlier than that date so you can get your finances organised.
With your balancing payment on the 31st January, you may also be required to pay your first payment on account towards the current tax year (if your balancing payment is more than £1,000). This amount will be equivalent to half of the amount of tax due for the return you have just submitted (as they assume that your income will remain at a similar level). The second payment on account will be due on the 31st July. See below for a worked example.
If you will be earning more than £85,000 from self employment in a tax year, you will also need to register for VAT (have a look at our guide here)
The HMRC website has all the information you need, including the link to register.
Worked example of payments schedule
Tax Year 6th April 2017 to 5th April 2018 (first year of self employment)
Calculated tax due £1,000
Tax due on 31st January is £1,500 – Made up of £1,000 balancing payment for 17-18 plus £500 payment on account for 18-19
Further payment on account due on 31st July £500
Therefore, if your tax due for 18-19 remains at £1,000, you will already have paid that amount, so no balancing payment is due. You will only have to pay your next payment on account of £500. If your tax due has increased or decreased, your balancing payments and payments on account will be adjusted.