Self Employment: Working For Yourself in the UK
You have decided to work for yourself, but what happens next? Read our helpful guide to all things self-employment to make sure you are fully informed on your new career journey.
Permissions To Trade
Depending on your trade (for example restaurants, childminders, cab drivers, and street traders) you may need a license or permission from your local authority. Your qualifications and business premises may be inspected to ensure you comply with regulations.
Premises
You may need permission or separate insurance to run a business from home and you’ll need to check if you have to pay business rates for the part of your home used for business. This mainly depends on whether the business area of your home is also used for domestic purposes. If you simply work on a computer in a bedroom, for example, you will probably not have to pay business rates. If you are trading from a shop, office, warehouse, or factory, business rates will normally apply. If in doubt you should contact your local authority for confirmation.
Naming Your Business
You can use your own name or trade under a business name. If “trading as” you will need to make sure the trading name is not similar to a business that already exists/considered offensive or misleading. You must include your own name and business name (if you have one) on any official paperwork, like invoices and letters and so on.
National Insurance Number
You will need your National Insurance number to register for Self Employment. If you do not have a National Insurance number you can apply online and call
for any help needed with your application.
Registering with HMRC
When you start working for yourself you need to tell HMRC as soon as possible. At the latest, you should register by 5th October in your business’s second tax year. If you register later than this, you won’t get a penalty as long as you send your Self-Assessment tax return and pay your bill on time.
How to Register and set up a personal HMRC account
You can register through your business tax account for Self-Assessment and Class 2 National Insurance. You will need a Government Gateway user ID and password to sign in. If you do not have a user ID you will be able to create one.
Your personal HMRC account will also give you access to your national insurance record, check your state pension, pay tax, and set up HMRC payment plans, marriage allowance claims, and lots more.
To set up please see the link below and follow the steps. Click on the Start Now icon and then create sign-in details.
https://www.gov.uk/personal-tax-account (right-click to open hyperlink)
Once you have set up your HMRC account please keep a note of your User ID and password.
Next step/once registered
Please follow this link https://www.gov.uk/register-for-self-assessment and answer the questions accordingly. It will ask to log into your account you created above.
If you are registering for self-employment you will be taken to the business tax section.
If you are registering to file a tax return for other reasons then you will be taken to the registering for self-assessment form.
Insurance
Depending on the business and how you trade, you may be required by law to take out certain types of insurance.
The main type of insurance is Public Liability Insurance which provides cover for members of the public who may have been injured or had property damaged as a result of you/your employees carelessness at work and this is recommended.
Other insurances to consider depending on your type of trade are professional indemnity, employer’s liability, premises and contents, vehicle, business interruption, and personal accident or sickness cover.
VAT
The business must register for VAT and Making Tax Digital (MTD) with HMRC if it has or expects to exceed the annual turnover threshold of £90,000 in a rolling twelve-month period.
If VAT registered VAT returns (normally quarterly) must be filed with HMRC depending on the VAT scheme the company decides to operate.
Employing Other People (PAYE)
If you plan to take on employees as an employer you will need to set up and operate a PAYE (Pay as You Earn) payroll scheme with monthly real-time information (RTI) submissions to HMRC.
Business Bank Account
You can operate your business through your personal bank account but you may wish to open a business bank account for simplicity and to keep personal and business transactions separate.
Keeping records for your business
You must keep accurate and detailed records for your business which must include a record of all your sales and purchases/expenses (please keep all business receipts).
Business records must be retained for at least five more years after the 31st January tax return submission of the relevant tax year in case of any HMRC queries. For example, if you filed your 2024/25 tax return online by 31st January 2026 you must retain your records until at least the end of January 2031.
National Insurance Contributions (NIC)
● The main rate of Class 4 NIC is 6% for profits between £12,570 and £50,270 and 2 % over that amount which is paid through your Self-Assessment tax return.
● Self-employed earners with profits of less than £6,725 will still be able to make voluntary contributions at the class 2 rate of £3.45 per week.
● If your business has profits between £6,725 and £12,570 you will receive a National Insurance credit, earning you entitlement to the state pension and contributory benefits, despite not paying any National Insurance.
Income Tax
You will pay income tax on your Self-Employed profits and must pay the balance of any tax you owe by 31st January following the end of the tax year.
For the 2024/25 tax year:
● You will not pay income tax on your first £12,570 of income unless profits/your taxable incomes are over £100,000
● Tax is then payable at the basic rate of 20% on taxable income up to £37,700 and then at the higher rate of 40% above this up to £125,140.
● Over £125,140 the tax rate is 45%.
Please note an individual’s personal tax owed for each year is ultimately contingent on an annual review of your entire tax affairs as you may have other income streams to take into consideration.
Payments on Account
Under HMRC rules if your tax due is over £1,000 you'll usually have to make 'payments on account' of the current year's tax. In its simplicity, HMRC estimate your tax owed for the following tax year will be the same as the previous tax year.
You'll have to make two payments, one by 31st January in the current year and the other by the following 31 July. Each payment is half of the tax due for the previous year.
For example, if you owe £1,000 tax for the 24/25 tax year you must pay this with a 50% deposit towards the 25/26 tax year. The total to be paid before 31st January 2026 would be £1,500 (£1,000 tax owed plus a 50% deposit of £500).
You will then need to pay another 50% deposit of £500 before 31 July 2026.
Please note the payments on account paid towards the next tax year (2025/26) will then be offset against the tax owed.
If you are no longer Self Employed
You will need to complete a tax return for the final year in which you stopped being Self Employed.
Being Self-Employed in the Construction Industry
Special rules apply to contractors and subcontractors in the construction industry.
You should register as a subcontractor with the Construction Industry Scheme (CIS) if you’re self-employed and are working for a contractor in the construction industry.
To register you’ll need to call the CIS helpline on 0300 200 3210 and tell HMRC:
● The name of the business you want to register - your own name if you trade under it as a self-employed individual
● Your business address and other details about your business
● The unique taxpayer reference number for the business
● Your National Insurance number
Once registered your contractor will make CIS deductions of 20% from the payments they make to you (if you are not registered your contractor will deduct 30%).
Your contractor will pay the deduction made from your payment to HMRC and these will be offset against your annual tax and National Insurance owed.
To find out more information if needed please visit www.hmrc.gov.uk/cis or you can call the CIS helpline.
Self-Employed Status
You can be employed and self-employed at the same time, perhaps by working for an employer during the day and running your own business in the evenings.
There's no legal definition of employment or self-employment and the answer will normally depend upon the facts of your working arrangements and what your contract says, or a combination of both.
You are probably self-employed if you answer “yes” to most of these questions:
● Run your own business and take responsibility for its success or failure
● Have several customers at the same time
● Can decide how, when, and where you do your work
● Are free to hire other people to do the work for you or help you at your own expense
● Provide the main items of equipment to do your work
● Risk your own money
● Agree to do a job for a fixed price regardless of how long the job may take
● Correct unsatisfactory work in your own time and at your own expense?
BECOMING SELF-EMPLOYED TICK LIST – where relevant
Business name and business stationery
Obtain any permits and planning permission from your local authority
Premises and business rates
Self Employment Registration
Insurance
VAT
PAYE
Bank account
Set up a business record keeping system
Would you like to learn more about Becoming Self Employed?
Call us today or email the ABMV team for a free no-obligation consultation.
01732 366077 | admin@abmv.co.uk
