10 things you need to know if you are self-employed

1. Register with HM Revenue & Customs for self-assessment 

Self-employed individuals need to register with HMRC once they start trading. You must register by 5th October after the end of tax year you began to trade. Registering with HMRC is simple and the whole process is fairly quick. Once you’ve registered, HMRC will provide you with a Unique Tax Reference (UTR) which you’ll need to file your tax return.  

For example: 

• Start trading 1st January 2024 = must register for self-assessment by 5th October 2024 
• Start trading 6th April 2024 = must register for self-assessment by 5th October 2025 

Failure to register on time and notify HMRC of your liability to tax will result in penalties. 

2. Prepare a tax return 

Tax returns are the method of reporting your income to HMRC and calculating your tax liability. The deadline for tax returns is 31st October for paper or 31st January for electronic submissions. 

Self-employed individuals must submit a tax return to HMRC if the following apply: 

• Self-employed income over £1,000 
• You’re a partner in a partnership 
• Your taxable income exceeds £100,000. Please note that for the 2023/24 tax year if your income is taxed through PAYE and is less than £150,000 you may not need to file a tax return. 
• You must pay the high income child benefit charge 

You can complete a tax return online using the HMRC online service. You can also authorise an accountant to prepare and submit your tax return on your behalf. Using an experienced accountant will ensure your tax return is correct and includes all relevant claims. 

3. Income tax rates 

Income tax rates for England, Wales and Northern Ireland and Scotland are reviewed for each tax year and can be found on the HMRC website. It's important to be aware of the current tax rates, as well as incoming changes as this will assist you with tax planning opportunities. 

Income tax for self-assessment is payable on 31st January and, for some, also 31st July. This will depend on whether they have the make payments on account. 

4. National Insurance Contribution rates 

National Insurance Contributions for England, Wales and Northern Ireland and Scotland are reviewed for each tax year and can be found on the HMRC website. It's important to be aware that as well as paying tax on your earnings you may also be required to pay NIC too. Different rates of NIC may apply depending on what work you do and the level of your income. 

5. Accurate accounting records and accounting software 

Cloud based software is a game-changer, it’ll save you time and make your bookkeeping easier to manage. For more benefits of online accounting click here. 

In the next couple of years, you may need to comply with Making Tax Digital (MTD). When you need to comply with MTD you must use MTD-compatible software. Read more about Making Tax Digital here.  

Keeping accurate and up to date records can help you in various ways, including: 

• Keeping an eye on your cashflow, so can manage and plan before it’s too late 
• Track your turnover level and indicate when you may need to consider registering for VAT. 
• Give your accountant accurate information to make preparing your accounts and tax return easier for everyone. 

TaxAssist Accountants have experience in digital software, including QuickBooks, Xero and Dext. We can help you embrace and make the most of the software options available to you. To discuss your options give us a call. Our guide to working paperless can be found here. 

6. Get an accountant 

An experienced accountant can be a valuable asset for your business, we can do more for you than submit tax returns. Building a relationship of trust with your accountant will guarantee that when your business experiences a change or a hurdle they know you well enough to support you through it. 

Our accountants at TaxAssist are here to help you and offer added value to your business by providing a knowledgeable and professional service. 

7. Business bank account 

As a self-employed individual, you may not need to have a business bank account. A business bank account can make your accounting life easier for you and your accountant. This enables you to keep your business and personal finances separate. 

8. VAT registration 

As a UK business, you must register for VAT if: 

• you are making taxable supplies and your taxable turnover for the last 12 months exceeds the VAT threshold of £90,000, or 
• you expect your turnover to exceed £90,000 in the next 30 days 

Taxable supplies are the sales of goods or services that are not exempt for VAT i.e. supplies that are taxed as standard, reduced or zero rated. 

9. Business structure 

Choosing your business structure will depend on your stance and your businesses situation. The question of sole trader vs. limited company is always worth a review with your accountant. Our detailed guide is a useful starting point for conversations. 

Please note that a sole trader is taxed on income earned, not income withdrawn. 

10. Business insurance 

As a business it’s important you have appropriate insurance in place. This includes professional indemnity, public liability, business protection and buildings/content insurance. 

For other ideas on how you can protect your business, please click here to read our guide. 

How TaxAssist Accountants can help 

TaxAssist Accountants are here to help you and your business thrive. We work closely with lots of self-employed individuals to support you in your business journey. Give TaxAssist Accountants a call today on 01379 773117 or use our contact form and we'll be in touch. 

Date published 9 Jan 2024 | Last updated 2 May 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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