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Do I Need To Register As A Self-Employed Sole Trader?

Are you unsure about whether you need to register as Self-Employed for tax purposes? Our guide can help you.

Do I Need To Register As A Self-Employed Sole Trader?

Understanding whether or not you’re self-employed means you’re aware of your tax obligations and responsibilities. HMRC will penalise you if you exceed your trading allowance, so it’s worth knowing precisely where you stand.

But there’s an incentive too… Knowing your status helps you access tax relief which could reduce your tax liability and optimise processes – plus you won’t have to worry about being incorrectly taxed.

The trouble is, it can be confusing to determine if you’re regarded as self-employed. Thankfully, Mike Parkes, our Self-Assessment expert, from the tax Self-Assessment app people GoSimpleTax outlines below who needs to register as self-employed to stay compliant, and how to do so.

What is self-employment?

There are certain distinctions that set those that are self-employed apart from regular employees. These generally include:

  • Operating a service that relies solely on you
  • Having multiple customers at the same time
  • Having the freedom to hire others at your own expense who help deliver or develop your offering

It’s worth mentioning that you could be doing all of the above – and more – in addition to your employment. For example, if you work in a 9-5 role and sell goods in the evening to make a profit, you are both employed and self-employed.

How do I know if I’m self-employed?

If you earn more than £1,000 from self-employment within a single tax year, the chances are that you are operating as a sole trader. However, if you’re uncertain of your status, take HMRC’s test.

Sole traders run their own business as an individual. They’re entitled to keep all the business’ profits after tax has been paid, are liable for any losses the business makes, and must stick to rules surrounding running and naming their business.

Once you’ve determined your employment status, all that’s left to do is register. After registering, you’ll need to keep records of all business sales and expenses following your status change. Plus, you’ll be required to send an annual Self Assessment tax return as well as pay Income Tax on your earnings.

Where do I register?

It’s simple: log on to HMRC and register yourself for sole trader status. Once done, you’ll receive a 10-digit unique taxpayer reference (UTR) number. With this, you’ll be able to set up your account for the Self Assessment online service.

Alternatively, you can choose to fill out this form online, print it, and then post it to HMRC. The downside to this method is that you won’t be able to save the document and return to it at another time. Everything will need to be complete and sent in one sitting.

You must have registered by the 5th October during your business’ second tax year. Failing to do so could result in being fined.

Once registered, you need to submit your Self Assessment tax return by 31st October (paper returns) or 31st January (online returns) – and pay your tax bill on the January date too. Additionally, if you make advance payments towards your tax bill, your second payment on account is due on 31st July.

About GoSimpleTax

When it comes to submitting the Self Assessment tax return itself, use an accounting software solution which easily formats and sends it directly to HMRC. GoSimpleTax is one such solution.

GoSimpleTax is HMRC-recognised and offers first-time submitters a near effortless experience in dealing with their newfound tax responsibilities. If you’re interested in focusing more on earning during self-employment take a free 14 day trialof the software – no credit card required.  

This article was published in our Guides section on 10/10/2019.

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