If you are self-employed, you are required to fill out a Self-Assessment tax return with HM Revenue & Customs. However, you may wonder if you are self-employed? This article will help you determine if your employment status for tax purposes and provide practical advice to make filing simple.
In essence anyone who is in business either as a sole trader or part of a partnership and receives income that is not taxed under the PAYE system is effectively self-employed.
So the simplest question to ask is: Do you work for another person or company to receive income? Certainly there may be other factors to consider, but the answer to that question can sum it up for most taxpayers.
If you’re still unsure, here are some other questions to ask.
Do you …
- Have the final say in how your business is run?
- Risk your own money in the business?
- Have responsibility for the losses as well as profits of your business?
- Provide the main items of equipment you need to do your job?
- Hire other people on your own terms to do the work you have taken on and pay them at your own expense
- Have responsibility for correcting unsatisfactory work in your own time and at your own expense
How do I register as self-employed?
There are three ways to register:
- Online to HMRC. This is the quickest and most convenient way to register.
- By phone. The HMRC has set up a self-employed helpline on 0845 915 4515. Lines are open from 8.00 am to 8.00 pm Monday to Friday and 8.00 am to 4.00 pm Saturday and Sunday (closed Bank Holidays).
3. By post. You can download and print an application (PDF 201K) to post to HMRC.
If you have an agent who will be completing the form for you, you must first ensure that you have signed a form 64-8: This authorizes your agent to act on your behalf.
You will need to provide the following information:
- National Insurance Number
- Date of Birth
- Contact Telephone Number
- Contact Email Address
- Date Self-Employment Started
- Nature of Your Business
- Business Address
- Business Telephone Number
- Unique Taxpayer Reference (UTR) if you were previously within Self Assessment
- Your Business UTR if you are joining an existing partnership
- Full Name(s) and Date(s) of Birth or Your Business Partner(s)
If you are self-employed in a partnership, each of the partners must register separately.
What if I have income taxed by the PAYE system, but am also self-employed?
It’s possible for you to be employed and self-employed at the same time. If you earn income from both employment and self-employment then you Income Tax and National Insurance contributions are due separately and collected in different ways.
If you work as an employee you pay any Income Tax and Class 1 National Insurance contributions due through PAYE (Pay As You Earn). Your employer deducts these from your pay before you get it.
If you have any income from self-employment it’s your responsibility to pay any Income Tax and National Insurance contributions due. Depending on how much you earn from self-employment you may have to pay Class 2 and Class 4 National Insurance contributions.
You pay Class 2 National Insurance contributions at a flat rate, either by monthly Direct Debit or by quarterly bill.
The total amount of tax and National Insurance contributions you pay is based on:
- Your combined income from both jobs – or all your jobs if you have more than two
- Any allowances and reliefs you get
If you expect to be both employed and self-employed you may be able to ‘defer’ some of your Class 2 and/or Class 4 National Insurance contributions. You’ll pay what’s due after the end of the tax year when the actual amount has been worked out. Doing this will make sure you don’t pay too much National Insurance on your self-employment income.
What Is My Deadline?
There are four key deadlines for sending in your tax return and paying any tax due:
- 31 October – this is the deadline for sending in the majority of paper tax returns
- 31 January – the deadline for sending in your tax return online
- 31 January – this is the payment deadline for what you owe for the previous tax year, and the deadline for making your first payment towards the current year’s tax bill (called ‘a payment on account’) if one is due
- 31 July – the deadline for your second payment on account – if one is due
Penalties and surcharges may apply if you miss these deadlines.
The deadlines for sending in your tax return are only later than the dates above in special cases, for example if you received your tax return late.
For more details about tax relief and expenses you can check out the official HMRC site. Any more questions? We are happy to help. Everybody has tax questions, why not apply for some expert help with your tax return?