What does it mean to be self-employed?
Right… let’s get one thing out of the way! Depending on who you’ve been speaking to, your mate Dave down the pub or Susie for a catch up over dinner, its important to first understand some of the terminology used.
Being self-employed is the official term as used by HMRC, but you may call yourself a freelancer, sole-trader or simply working for yourself (not under a company). By and large, all of these terms mean the same thing… in the eyes of HMRC, you’re self-employed.
How do I know if I am self-employed?
A couple of key signs or triggers to distinguish between being self-employed or not. Being self-employed:
- You don’t receive a PAYE payslip from your employer and you’re not subject to an employment contract
- You do some work, raise a bill, send it to your customer you get paid directly for that piece of work
- Its up to you to declare your tax and NI
Telling HMRC that you’re self-employed
Being self-employed and notifying HMRC are two different things. You must tell HMRC if you are self-employed, unless you’ve made less than £1,000 during the tax year from your trade.
The process is quite straightforward to inform HMRC that you’re self-employed and once registered, that’s it! You just need to declare your income and expenses in your self-assessment tax return.
If registering for the first time, have your personal details to hand such as your email address, contact number, date of birth, NI number etc.
- Click here to and then click on “Register online”.
- Enter your email address.
- You will then be asked a few questions.
- Once done, you will be set up with a Government Gateway ID username and password via your email. You will also be sent a “Unique Tax Reference” (UTR) number in the post.
- You will also be sent a separate letter with a special activation code to finish setting up the online account.
- Once all set up, you are all set to go to complete your tax return.
- Make sure you keep records of your trade (details of income, expenses, equipment purchases etc.)
You can print out a form and send it in the post to HMRC by filling out a CWF1 or SA1 form – but this will take longer to register than completing the forms online.
Once you’re all set up with HMRC, click on the relevant topic below for further information:
- What records to keep and how to keep them
- Stop becoming self-employed and informing HMRC
- Tax and National Insurance for self-employed
Sounds confusing? Don’t fall foul of HMRC legislation!
If you need to register as self-employed with HMRC, you must inform HMRC, register for and complete a self-assessment tax return. If not already registered to file one, you must do so immediately.