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How to Register as Self Employed

So, you’ve decided to set up as self-employed? One of the first and most important things to do when you start out as self-employed or a sole trader is to register yourself as self-employed with HM Revenue & Customs (HMRC) to pay tax. Self-employed people need to do this no matter what type of work they are doing and whether they’re doing self-employed work full-time or as a side income. In this guide, we explain exactly how to register as self-employed, where to do it, and how much it costs. 

Do I need to register as self-employed?

There are instances when your employment status might not be entirely obvious, and you might be unsure whether you count as self-employed. You’re most likely self-employed if you: 

  • Run your own business and are responsible for its success or failure 
  • Provide services for several clients or customers at once 
  • Decide how, when, and where you do your work 
  • Can hire other people at your own expense 
  • Provide the main items of equipment to do your work 
  • Are responsible for finishing unsatisfactory or additional work in your spare time 
  • Charge an agreed fixed price for your work 
  • Sell goods or services to make a profit (unless you are selling unwanted items on an ad-hoc basis) 

When do I need to register as self-employed? 

According to HMRC, you should complete your registration with them as soon as you become self-employed. However, legally you do not have to register as a sole trader until the 5th of October after the end of the tax year in which you became self-employed (a tax year runs from 6 April to 5 April the following year). However, it’s best to register as early as you can. Since if you don’t register before the deadline, you could end up with a very expensive tax bill.  

How do I register self-employed status? 

If you meet the criteria for self-employed, then you need to register this with HMRC. You can do this online, by phone, or by post, however, it is easiest to register online.  

First, register for an account with gov.uk and complete your registration on the Government Gateway. You will need to provide information about your business including your trading name and contact details. Some of the information you’ll need to provide for your self-employed registration includes: 

  • The date you started your business 
  • Basic personal details including your home address 
  • Your National Insurance number 
  • Information about your job 

After registering, HMRC will send you a letter containing your 10-digit Unique Taxpayer Reference (UTR) and you’ll be enrolled for self-assessment online service. They will also set up your online account, which gives you access to a range of digital government services. This will normally take around 7-10 days.  

Do I need to register as a sole trader? 

Being self-employed doesn’t automatically mean that you’re operating as a sole trader. If you work for yourself on your own, then you are likely to be a sole trader. If you’re in a business partnership that you run alongside someone else, you need to register as self-employed but instead of registering as a sole trader, you should register as a partner. 

Do I need to register if I have a limited company? 

Owning a limited company and being self-employed are different business structures. When you own a limited company, you’re the owner of the company as well as an employee which means the registration process is different. Your tax and National Insurance calculation will be different too. You should do some research and take this into consideration before deciding on whether to go self-employed or set up a limited company.  

Getting insured when you’re self-employed 

Once you’re registered as self-employed, you should make sure that you have the right insurance in place. The insurance that you need will depend on the type of work that you’re doing and whether you have additional employees working alongside you. Some common types of insurance that a small business owner might need include public liability for accidents, professional indemnity for mistakes, cyber insurance, or employers’ liability insurance. Do some search to find out the legal requirements and what’s recommended for your type of work and team-size.  

What are my responsibilities after I register as self-employed? 

Once you start working on a self-employed basis, make sure that you keep accurate records of any sales or outgoings connected to your business. Also, keep hold of any correspondence from HMRC to help with making future tax returns. 

Once you’re all set up and registered, you will need to fill out an annual Self-Assessment tax return, which you need to file by 31st January every year. Most sole traders hire an accountant to help them with their taxes since it can be complex to arrange alone. It’s a good idea to put tax money aside in a separate bank account from your first day working as a sole trader so that you don’t accidentally spend it.  

As well as income tax, you will also be responsible for paying your own National Insurance Contributions (NICs). You’ll have to pay both Class 2 National Insurance and Class 4 National Insurance Contributions. 

If your annual earnings are above the VAT threshold of £85,000 you should register for VAT. Remember to keep a close eye on your income because once your annual turnover passes this threshold, you only have 30 days to register. 

Remember, you don’t have to wait for your turnover to reach the threshold to register for VAT. You can become VAT-registered at any time and you might want to do this depending on the needs of your business. You might decide that it’s beneficial for you to register for VAT as soon as you start up.  

Setting Up a Separate Bank Account 

It’s not a requirement to set up a separate business bank account when operating as a sole trader, however, it can make it much easier to manage your finances if you do.  

If you have clients or employees based overseas you will be sending or receiving payments from, you should put a currency strategy in place to ensure that you’re not making losses in the exchange market.  

Halo Financial can put a currency strategy in place for your business that makes your money go further in the exchange market. Find out more by registering for a free business account today. 

How to register as self-employed – FAQs

You are officially self-employed if you work for yourself, run your own business, and take responsibility for its success or failure. If this is the case, you must register with HMRC to be officially self-employed so you can make tax payments. 

No, all self-employed people need to register with the HMRC (HM Revenue & Customs). This is so you can pay tax on the money you earn through self-employment. The process is very simple and can be done online. 

You legally need to register as self-employed by the 5th of October at the end of the tax year in which you became self-employed.