Registering as Self-employed with HMRC

According to Statista, there were around 4.38 million self-employed workers in the UK, and this number keeps growing year over year. Self-employment is a popular choice for many people who want more control over their work life. Whether you're a freelancer, contractor, or running your own small business, being self-employed allows you to manage your time, choose your clients, and potentially earn more than in a traditional job. It's an attractive option for those who value flexibility and independence.

From starting your side business to going freelance full-time, becoming self-employed can feel scary and exciting all at once.

When you register as self-employed, you’re letting HMRC know that you are earning money on your own, and this helps you stay compliant with the law.

By officially registering, you can access several benefits. For instance, you'll be able to claim tax-deductible expenses, reducing your overall tax bill. You'll also contribute to National Insurance, which can entitle you to certain state benefits, such as the State Pension.

Ready to get started? We've got all the information you need below:

Generally, you’re considered self-employed if you run your own business, take responsibility for its success or failure, and have control over how you work. This means you don’t work under an employer, and you typically decide your own hours, choose your clients, and charge for your services. You're likely to be self-employed if the following factors apply:

• You run your own business
• You're able to decide when and how you work, as well as what you work on
• You have the option of hiring other people
• You have more than one client or customer concurrently
• You aren't paid a regular wage or salary
• You receive income that isn't taxed under PAYE for goods or services you provide

It's also possible to be employed and self-employed at the same time, such as when you're doing freelance work on top of your day job.  

Tip: If you're still unsure, check out the HMRC's Check Employment Status for Tax (CEST) Tool. You'll be asked a series of questions to determine your employment status. You can also contact HMRC to ask about your employment status.

Why Do You Need to Register as Self-employed?

Registering as self-employed is a legal requirement in the UK if you work for yourself, run your own business, or earn income outside of regular employment. It ensures you comply with tax regulations, allowing you to report your income and pay the right amount of tax and National Insurance.

Let’s look at some common scenarios where you would need to register as self-employed:

• Freelancers: Writers, designers, photographers, and consultants who work independently for various clients.
• Contractors: Builders, electricians, and IT professionals who take on short-term projects for different companies.
• Small Business Owners: People who run their own shops, online stores, or home-based businesses.
• Tradespeople: Plumbers, carpenters, and decorators who offer their skills and services directly to customers.
• Gig Economy Workers: Individuals who drive for ride-sharing apps, deliver food, or offer other on-demand services.

As per gov.uk, you should register as self-employed as soon as you start earning money from your business or freelance work. The general rule is that you must register with HMRC by 5th October in your business's second tax year. For example, if you started working for yourself in July 2024, you would need to register by 5th October 2025. This gives you enough time to inform HMRC about your self-employment status and prepare for your first tax return.

If you fail to register within three months of starting your business, you'll be charged a fine of £100. Further delays may result in additional penalties.

You'll need to register as self-employed if you're setting up as a sole trader or partnership.

You won't need to register if you're setting up a limited company, as you'll be considered as both the owner and an employee of the business. This process is more complicated, and we'll cover this in a separate article on setting up a limited company.

How to Register as a Self-employed Sole Trader?

Being self-employed and being a sole trader are not exactly the same. A sole trader refers to the type of business structure, while self-employed describes how you manage your tax obligations. As a self-employed individual, you can operate under various business structures, such as a sole trader, limited company, or partnership. In essence, sole traders are self-employed individuals who fully own and run their business.

So, how do you register as a self-employed sole trader? It’s straightforward.

• Online: Fill in this form if you've sent a return online before. If you haven't sent a return online previously, you'll need to register first.
• Or by post: Fill up this form, print it out and then post it to HMRC.

If you're setting up a partnership, you can register:

• Online: Use the online form service
• Or by post: You can register the partnership using form SA400. Use form SA401 to register as a partner.

Steps to Register as Self-employed Online with HMRC

Registering as self-employed in the UK is a straightforward process. Here’s a step-by-step guide to help you through it:

1. Go to the HMRC Website:

Start by visiting the HMRC website.

2. Create a Government Gateway Account:

If you don’t already have one, you’ll need to create a Government Gateway account. This will give you access to HMRC’s online services.

3. Fill in the Registration Form:

Once logged in, find the option to register as self-employed and fill out the form with your details. This includes:

1. The type of tax you want to register your business for (Self-Assessment)
2. Type of your business
3. The date you started working for yourself
4. National Insurance number
5. Home address and contact details
6. The type of self-employed work you do
7. Business contact details

4. Submit the Form:

After completing the form, submit it online. HMRC will process your registration and send you a confirmation.

5. Receive Your Unique Taxpayer Reference (UTR):

HMRC will send you a letter with your UTR, which you’ll need for future tax returns.

Check below video by HMRC on how to register for self assessment if you are self-employed:

As a self-employed individual, there are several key legal obligations you need to fulfil. These include:

Income Tax:

As a self-employed person, you need to file an annual Self Assessment tax return with HMRC. This return calculates your income tax based on your earnings after deducting allowable business expenses. You’ll pay tax on your profits, which is your income minus expenses. Consider availing self assessment service if you are not pro at tax obligations and doing it yourself.

Key Deadlines:

• 31st January: The deadline to file your Self Assessment tax return and pay any tax you owe for the previous tax year.
• 31st July: If your tax bill is high, you might need to make a second payment on account by this date.

National Insurance Contributions (NICs):

In addition to income tax, you also need to pay National Insurance Contributions (NICs). There are two types of NICs for self-employed individuals:

• Class 2 NICs: These are paid if your profits are above a certain threshold (currently £12,570 per year). Class 2 NICs contribute towards benefits like the State Pension.
• Class 4 NICs: These are based on your profits and are paid if your earnings exceed a higher threshold. Class 4 NICs are calculated as a percentage of your profits.

Register for VAT:

If your business turnover exceeds £90,000 in a 12-month period, you must register for VAT. This means you’ll charge VAT on your services or products and submit VAT returns to HMRC. Even if your turnover is below this threshold, you may choose to register voluntarily to reclaim VAT on business purchases.

Maintaining Proper Records

Fulfilling other legal obligations, such as filing your tax return correctly is made easier when you maintain proper records. Be sure to keep track of all sales and income, expenses, as well as payroll records if you have employees.

Ensure that you've kept a copy of important documents-such as receipts, bank statements and invoices. After you've filed your tax return for a specific year, all relevant documents pertaining to that year must be kept for five years. That's because HMRC may ask to review these, and you can be fined for failing to keep records.

Do I get extra support with registering as self-employed if I have additional needs?

You can reach out to HMRC extra support team to get extra support if your health condition or personal circumstances make it difficult to contact. An individual may require extra support if he or she:

• Has dyslexia, autism or cognitive difficulties
• Has reduced mobility or physical disabilities
• Has sensory disabilities, like a visual, hearing or speech impairment
• Has mental health conditions, like depression, stress or anxiety
• Is experiencing financial hardship
• Is a victim of domestic abuse, including economic abuse
• Is hospitalised

HMRC can help in a variety of ways, including extending deadlines, providing information in a different format, organising an interpreter and more. Further information is available on Gov.uk’s extra support resource.

What insurance is required for the self-employed?

Professional indemnity insurance, public and product liability insurance, business contents insurance, employers’ liability insurance, management liability insurance and cyber insurance are some examples of covers that self-employed workers - such as freelancers, contractors and small business owners - typically need.  

Your insurance needs will vary, depending on factors such as the type of work you do, whether you’re hiring employees or if your clients require you to have a certain type of insurance cover.

For instance, if you have employees, having employers’ liability insurance is mandatory in the UK. Or if you’re subcontractor for a primary contractor, you may be required to have public liability insurance.

If you need help with deciding on the type of cover you need, refer to our article on key questions you should ask yourself before you get business insurance.

Registering as self-employed in the construction industry

For self-employed registration in the construction industry, you must register for the Construction Industry Scheme (CIS) to make sure you are paying the right amount of tax. Construction workers who don’t register for CIS pay 30% tax instead of 20%.

How to Register for Self-assessment if You are not Self-employed?

If you're not self-employed but need to register for self-assessment, the process is simple. Visit the HMRC website and create a Government Gateway account. Provide your personal details, including your income type, and complete the registration form. Once registered, HMRC will send you a Unique Taxpayer Reference (UTR) number, which you'll need to file your tax return. For guidance, check the helpful video from HMRC below:

Follow the below steps to stop being self-employed:

1. Complete Outstanding Tax Obligations
2. Deregister for Self-Assessment
3. Complete and submit the Deregistration Form
4. Wait for Confirmation by HMRC
5. Update Your Records
6. Cancel Other Business Registrations

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Registering as self-employed is an important step for anyone who wants to work for themselves in the UK. It ensures you comply with the law, manage your taxes properly, and take advantage of the benefits of being your own boss.

If you’re ready to register as self-employed but need assistance, we’re here to help. You can always contact our accountant for self-employed or book a free consultation to discuss your requirements. Our expertise can guide you through the complexities, making the registration process efficient and stage the way for a successful self-employed journey.

Frequently Asked Questions (FAQs)

How much does it cost to register as self-employed?

Registering as self-employed with HMRC is free. However, you’ll need to budget for taxes and National Insurance contributions once you start earning.

Can I be employed and self-employed at the same time?

Yes, you can be both employed and self-employed simultaneously. You’ll need to pay tax on both types of income and may need to complete a Self Assessment tax return.

What happens if I don’t register as self-employed?

If you don’t register as self-employed, you risk facing penalties from HMRC. You may also miss out on important benefits like claiming business expenses or making National Insurance contributions toward your State Pension.

Do I need to register my business if I earn less than $1000?

If you earn less than £1,000 from self-employment in a tax year, you may not need to register with HMRC due to the "trading allowance." However, if you want to claim expenses or pay National Insurance, it's advisable to register.