10 Things You Need to Know if You Are Self-employed

Register with HM Revenue & Customs for Self-Assessment

Self-employed individuals must register with HMRC once they start trading. You need to register by 5th October following the end of the tax year in which you began trading. HMRC will provide you with a Unique Tax Reference (UTR) necessary for filing your tax return.

Example:

• Start trading on 1st January 2024 = Register by 5th October 2024.
• Start trading on 6th April 2024 = Register by 5th October 2025.

Failure to register on time results in penalties.

Prepare a Tax Return

Tax returns report your income to HMRC and calculate your tax liability. Deadlines are 31st October for paper submissions and 31st January for electronic submissions.

Self-employed individuals must submit a tax return if:

• Self-employed income exceeds £1,000.
• You’re a partner in a partnership.
• Your taxable income exceeds £100,000.

You can file a tax return online using HMRC’s online service or authorize an accountant to prepare and submit it on your behalf.

Income Tax Rates

Income tax rates vary annually and can be found on the HMRC website. Being aware of current and upcoming tax rates assists with tax planning. Self-assessment tax is payable on 31st January and, for some, also on 31st July, depending on whether payments on account are required.

National Insurance Contribution Rates

NIC rates are reviewed annually and can also be found on the HMRC website. You may be required to pay NIC in addition to income tax, with different rates applying depending on your income and type of work.

Accurate Accounting Records and Software

Using cloud-based accounting software can save time and simplify bookkeeping. Accurate and up to date records help manage cash flow, track turnover, and make preparing your accounts and tax return easier.

• Compliance with Making Tax Digital (MTD) requires MT compatible software.
• Software options include QuickBooks, Xero, and Dext.

Get an Accountant

An experienced accountant can do more than just submit tax returns; they can provide valuable advice and support, helping you navigate changes and challenges in your business.

Business Bank Account

While not mandatory, a business bank account can simplify your accounting by keeping business and personal finances separate.

VAT Registration

You must register for VAT if your taxable turnover exceeds £90,000 in the last 12 months or if you expect it to exceed £90,000 in the next 30 days. Taxable supplies include sales of goods or services that are not VAT exempt.

Business Structure

Choosing the right business structure (sole trader vs. limited company) depends on your specific situation. Consult with an accountant to determine the best option for your business. Note that sole traders are taxed on income earned, not income withdrawn.

Business Insurance

Having appropriate insurance is crucial, including professional indemnity, public liability, business protection, and buildings/content insurance.

How AMAccountex Ltd Can Help

Am Accountex Ltd is here to support you and your business. We work closely with Self-employed individuals to help you thrive. Call us today on 07443609141 or use our contact form, and we’ll be in touch.