How to Register as Self Employed?

Registering as self employed is a crucial step for anyone looking to start their own business or work independently. Whether you're a freelancer, contractor, or running a small business, understanding how to register with HMRC (Her Majesty's Revenue and Customs) is essential. This process ensures you comply with tax regulations and can manage your finances effectively.

In this blog, we'll walk you through the steps to register as self employed in the UK, from determining if you need to register to completing the necessary forms. We'll also cover important deadlines, what happens after you register, and common mistakes to avoid. By the end of this blog, you'll have a clear understanding of the registration process and be well prepared to embark on your self employment journey.

What does It mean to be self employed?

Being self employed means you work for yourself rather than being employed by a company or organisation. As a self employed individual, you have the freedom to choose your clients, set your own hours, and control how you run your business. This can include freelancers, contractors, sole traders, and small business owners.

Unlike traditional employees, self employed people are responsible for managing their taxes, National Insurance contributions, and business expenses. This means you need to keep accurate records of your income and expenses and file a self Assessment tax return each year.

Self employment offers flexibility and independence but also requires a good understanding of financial management and legal obligations. Whether you're offering services, selling products, or running a consultancy, being self employed means taking charge of your professional life and making decisions that directly impact your business success.

When should you register as self employed?

Knowing when to register as self employed is important to avoid penalties and ensure compliance with HMRC regulations. Here are the key points to consider:

1. Start of business activities: You should register as soon as you start your business activities. This includes any preparatory work such as marketing, setting up a website, or seeking clients. HMRC considers your business to be in operation from the moment you begin these activities.

2. Income generation: If you start earning money from your self employment, you need to register. This applies even if you haven't yet received any payments but have issued invoices or agreed on work.

3. Deadline for registration: You must register by 5 October in your business’s second tax year. For example, if you started your business on 21 September 2023, you need to register by 5 October 2024. Missing this deadline can result in fines.

4. Simultaneous employment: If you are employed and also have self employment income, you still need to register. Your employed wages are taxed through PAYE, but your self employment income must be reported separately.

5. Construction industry scheme (CIS): If you work in the construction industry, you need to register for the CIS. This is mandatory for subcontractors like builders, painters, and carpenters. Failure to register means you will be taxed at a higher rate of 30% instead of 20%.

6. No income yet: Even if you haven't earned any income yet, you should still register if you are actively seeking work or preparing to start your business. HMRC requires registration based on the commencement of business activities, not just income generation.

7. Avoiding penalties: Registering on time helps you avoid penalties. If you fail to register within three months of starting your business, you could be fined £100, with additional penalties for further delays.

By following these guidelines, you can ensure that you register as self employed at the right time, stay compliant with HMRC regulations, and avoid unnecessary fines.

How to register as self employed?

Determine If you need to register

Before you start the registration process, confirm whether you need to register as self employed. You need to register if you are setting up as a sole trader or a partnership. If you are setting up a limited company, the process is different, and you will be considered both the owner and an employee of the business.

Gather necessary information

To register as self employed, you will need the following information:

1. National Insurance number

2. Personal details (name, address, date of birth)

3. Details about business (start date, type of business)

4. Contact information

Choose registration method

You can register as self employed either online or by post.

Online Registration

1. If you have previously sent a tax return online, you can use your existing HMRC login details.

2. If you are new to online returns, you will need to create an account on the HMRC website and follow the instructions to register as self employed using the CWF1 form.

Postal Registration

1. Download and fill out the SA1 form from the HMRC website.

2. Print the completed form and send it to HMRC by post. This method may take additional time to process.

Complete the registration process

Once you have chosen your registration method, follow these steps:

For sole traders

1. Complete the CWF1 form online or the SA1 form by post.

2. Provide all necessary information accurately to avoid delays.

For partnerships

1. Register the partnership using the form SA400.

2. Each partner must also register individually using form SA401.

Set up Unique Taxpayer Reference (UTR)

After registering, HMRC will send you a Unique Taxpayer Reference (UTR) number. This 10 digit number is essential for managing your tax affairs. Keep it safe as you will need it for filing your Self Assessment tax return and other communications with HMRC.

Understand tax obligations

As a self employed individual, you are responsible for:

1. Filing your Self Assessment tax return by 31st January each year.

2. Paying income tax and Class 2 and Class 4 National Insurance Contributions. These payments are due by 31st January and 31st July each year.

Maintain proper records

To ensure you meet your tax obligations, maintain accurate records of:

1. Sales and income

2. Business expenses

3. Payroll records (if you have employees)

4. Important documents such as receipts, bank statements, and invoices

Keep these records for at least five years, as HMRC may request to review them.

Meet Important Deadlines

Register as self employed as soon as you start your business activities. You must register by 5th October following the end of the tax year in which you started your business. Failure to register on time may result in a fine of £100 or more.

By following these steps, you can successfully register as self employed and ensure you meet all necessary legal and tax obligations.

Important deadlines to remember

When registering as self employed, it's crucial to keep track of several key deadlines to avoid penalties and ensure compliance with HMRC regulations:

1. 5 October: You must register for self assessment by 5 October following the end of the tax year in which you became self employed. This is to inform HMRC that you need to file a tax return.

2. 31 October: If you choose to submit a paper tax return, it must be filed by 31 October. Missing this deadline can result in penalties, even if you have no tax to pay.

3. 30 December: If you want HMRC to collect your tax through your PAYE tax code, you must submit your online tax return by 30 December. This option is available if you owe less than £3,000 and already pay tax through PAYE.

4. 31 January: The final deadline for filing your online tax return and paying any tax owed for the previous tax year is 31 January. This is a critical date for all self employed individuals.

What happens after you register?

Once you've successfully registered as self employed, several important steps and responsibilities follow. Here's what you can expect:

1. Receive your Unique Taxpayer Reference (UTR): HMRC will send you a letter containing your Unique Taxpayer Reference (UTR) number. This is a 10 digit number that you'll need for all your tax related correspondence and filings.

2. Set up a business bank account: While not mandatory, it's highly recommended to open a separate bank account for your business transactions. This helps keep your personal and business finances separate, making managing your accounts and filing your taxes easier.

3. Start keeping financial records: Begin maintaining accurate records of your income and expenses. This includes invoices, receipts, and any other financial documents. Good record keeping is essential for completing your self assessment tax return and can help you claim allowable expenses.

4. Register for National Insurance Contributions: As a self employed individual, you'll need to pay Class 2 and possibly Class 4 National Insurance contributions. HMRC will inform you about the amounts and deadlines.

5. Prepare for self assessment tax returns: You need to file a Self Assessment tax return each year, detailing your income and expenses. HMRC will send you reminders about the deadlines, but it's your responsibility to ensure your return is filed on time.

6. Understand your tax obligations: Familiarise yourself with your tax obligations, including how much tax you need to pay and when. This may include setting aside money regularly to cover your tax bill.

By following these steps, you'll be well on your way to managing your self employment successfully.

Common mistakes to avoid when registering as self employed

When registering as self employed, it's easy to make mistakes that can lead to complications down the line. Here are some common mistakes to watch out for and how to avoid them:

1. Incorrect information: Providing incorrect or incomplete information during registration can cause delays and issues with HMRC. Double check all details, including your name, address, and National Insurance number, to ensure accuracy.

2. Set up a business bank account: While not mandatory, it's highly recommended to open a separate bank account for your business transactions. This helps keep your personal and business finances separate, making managing your accounts and filing your taxes easier.

3. Not keeping records: Proper record keeping is essential for self employed individuals. Failing to keep accurate records of your income and expenses can lead to problems when filing your tax return. Make it a habit to organize receipts, invoices, and bank statements from the start.

4. Ignoring National Insurance Contributions: As a self employed person, you are responsible for paying National Insurance Contributions (NICs). Forgetting to account for these can result in unexpected bills. Ensure you understand your NIC obligations and set aside funds accordingly.

5. Overlooking tax deductions: Many self employed individuals miss out on valuable tax deductions because they are unaware of what they can claim. Familiarize yourself with allowable expenses, such as office supplies, travel costs, and professional fees, to reduce your tax liability.

By being aware of these common mistakes and taking steps to avoid them, you can ensure a smoother registration process and set yourself up for success as a self employed individual.

FAQs about registering as self employed

Do I need to register as self employed if I have a full time job?

Yes, if you earn additional income through self employment, you must register with HMRC, even if you have a full time job. This ensures you pay the correct amount of tax on your self employed earnings.

How soon do I need to register as self employed?

You should register as self employed by 5th October following the end of the tax year in which you started your self employment. For example, if you started working for yourself in June 2024, you need to register by 5th October 2025.

What information do I need to register as self employed?

To register, you'll need your National Insurance number, personal details (name, address, date of birth), and details about your business, such as the start date and type of work you do. This information helps HMRC set up your tax records accurately.