Are you considering Self Employment? Here's what you need to know
June 16, 2014
Setting up a new business
Becoming self employed is the quickest and easiest way to get your business up and running. However, there are a number of different structures under which you can operate a business so you should take professional advice before making a decision. It's important to get it right and there are a number of aspects to consider.
What is Self Employment? This means that you’re working for yourself, although you may also have people working for you. You’ll pay income tax on your taxable profits, through Self Assessment. You will also pay Class 4 National Insurance through Self Assessment. It is important to realise that you are responsible for paying your own income tax and national insurance, unlike when you are employed and work for somebody else. The law makes no distinction between you and the business which means that you are personally liable for any debts that the business may incur.
Registering for Self Employment When you start working for yourself you need to advise HMRC straight away or you may receive a financial penalty.
To register, you can telephone the Newly Self Employed Helpline on 0845 915 4515 with your personal details including national insurance number. Alternatively, you can register online at www.hmrc.gov.uk.
Keeping Records Once you've started your business it is essential to keep full and accurate records of your income and expenditure. It’s a legal requirement to do so. The amount of tax and national insurance you pay will be based on your business profits so you must keep good records of everything you sell and purchase.
Paying Tax and National Insurance You will notify HMRC of your profit by completing a Self Assessment Tax Return. Any other income such as rental, pensions, bank interest etc must be declared on the return. After the tax year ends on 5th April you will need to complete the tax return either online or a paper form. HMRC must receive your tax return by 31 January the following year if completing online or 31 October if completing a paper form. If your tax return is late you will receive a financial penalty.
You also need to pay any tax due by 31 January and this is the same date for payment whether you complete the tax return online or by paper. You will also need to make Payments on Account on 31 January and 31 July (see below).
You will also need to pay Class 2 national insurance separately and this is usually collected monthly by direct debit. The current rate for Class 2 national insurance contributions is £2.75 (2014-2015) a week. However, if your earnings are below £5,885 per year (2014-15) you might not need to pay. You can apply to HMRC for this exception using form CF10.
We can help with all of the above, and deal with all the necessary forms for you.
Please give us a call to find out how we can help you! 01277 633383