How to Be Self Employed in the UK
Be Self Employed in the UK
It’s the ease startup that you can run your new business, which is one of the main benefits of becoming self employed in the UK. Moreover, you can test the water and see whether working for yourself suits you when you become a sole trader. You’ll need to tackle to help you understand some of the most important issues while becoming self employed here.
But, you work on your own and run your own business as an individual when you’re at the self employment or a sole trader. It means that, after paying taxes, you can keep all the profits you make. Also, you’re personally liable for any financial losses in this concern. Moreover, you can hire employees as a sole trader. However, you have to maintain good records of all outgoing expenses and anything you buy for your business.
Steps to Be Self Employed in the UK
You need to maintain some steps to be self employed in the UK. There are some processes that need to conduct with the government body as well. Here is the summary of what you need to make real the self employment ideas below:
- Registration with HMRC & paying taxes
- Consider registering for VAT
- Get a business bank account
- Ensure you’re properly insured
- Maintain accurate and up-to-date financial records
You’ll be responsible for paying your own income tax and National Insurance (NICs) when you set up as a sole trader. But, you must register with HMRC if you start working as a sole trader in the UK. At your business’ second tax year up to 5 October, you can do this at any time. For the following year, a tax year runs from 6 April to 5 April.
For example, you must register as self-employed with HMRC by 5 October 2018 at the very latest if you start working as a sole trader in January 2018. This is because January 2018 is in the 2017/18 tax year; as a result, your business’ second tax year (2018/19) will be 5 October 2018. It depends on your own particular circumstances how to register as self employedstatus with HMRC.
Self- assessment tax return – Income tax
You’ll be responsible for calculating how much tax you need to pay when working as a self employed. Also, every year, you have to complete a Self Assessment Tax Return. So, most small business owners will employ an accountant to calculate the amount of tax you need to pay and to prepare accounts in practice.
Self employed National Insurance Contributions (NICs): You’ll also need to pay your own National Insurance contributions (NICs) when start operating as self employed.
Class 2 NICs: You need to pay Class 2 NICs on your income as a sole trader. That’s 2.95 a week for the 2018/19 tax year for you. You’ll not have to pay Class 2 NI contributions if the profits from your self employment opportunities are less than £6,205 in the 2018/19 tax year.
Class 2 NI contributions: Class 4 NICs
Also, self employed workers need to pay Class 4 NICs for their work. This is 9% on any annual profits you make between £8,424 and £46,350, and 2% on any profits above £46,350 for the 2018/19 tax year. The Government announces that Class 4 NICs will increase to 10% and then 11% in the spring 2017 Budget.
Consider registering for VAT
You must register for VAT if your business has an annual turnover of £85,000 or more as of April 2018. Also, you must also register if you look like you’re going to hit this annual VAT threshold over the coming 12 months at any stage of the business cycle. Every year, it usually rises up to thousands. Moreover, ensure that you let HMRC know risk paying a fine within 30 days. Even if you don’t need to you might decide to register for VAT in some cases. This is because you’ll get more credibility and you’ll be able to claim the VAT back on eligible purchases you make if you have VAT registration. As it makes accounting for VAT much simpler, you can consider the flat rate VAT scheme. Read more: Ideas to be your own boss
Get a business bank account
It’s vital to keep your business records and finances separate from your personal affairs as a sole trader, although your business income will be taxed alongside your personal tax. So, we recommend you open a separate business bank account for this issue. It’s only £6-£10/month plus some transaction fees are the small business current account fees. As a result, most of the High St banks usually offer up to 12-18 months free business banking for new businesses, so you can shop around. When you have your business name on cheques and invoices, it looks more professional.
But, there are now viable alternatives to opening a business account with a High St bank if your business won’t need to write or pay in cheques. So, when you have a less than perfect credit history and you are in a hurry to open your account, these can be a particularly good option. Also, you should also open a business deposit account to get a little interest on your money, even if rates are still at historic lows if you’re likely to hold cash for some time.
Ensure you’re properly insured
It’s compulsory by law to have certain insurance policies in place when you start a business. This is essential to cover you need to take out depends on the type of business you are. Also, you’re working industry requires it. As some other optional insurance cover gives you, so you might also want to have the reassurance.
Moreover, the legal obligation is to take out employer’s liability insurance when you employ another person. It also requires if you have any part-time worker. You must display your certificate of insurance in a visible area and you’ll need the cover of at least £5 million. In case of failing to have a policy in place, you can expect a very heavy fine.
So, you should also consider getting your own insurance for professional indemnity if you provide any type of professional service or advice to clients. This is because of covering if a client sues you being unhappy with your services.
Maintain accurate and up-to-date financial records
Yes, you must keep on top of your books to be a successful sole trader. It’s compulsory to keep clear and accurate records of all your business transactions from the start. This will ensure that you keep the tax authorities happy and it makes easier to operate your business. It’s only possible when you’re organized and your paperwork is continuously up to date. So, if you give more time to work on your new business, you can do these efficiently and quickly.
Before you are self employed in the UK, it’s important to take the right decision. It’s also important to decide whether you’re going to be a sole trader or something else. So, a proper decision with a good plan can make your success in the business. We’re here with you to help with any problem. If you need any help, let us know it in the comment section. We’ll reply your query as soon as possible.