by Nick Robinson | Jul 23, 2016 | Self Employed
The decision to become self-employed is not one to be taken lightly – it is an entirely different experience to being employed and receiving a regular salary from which the tax is already taken and dealt with. Being self-employed is the ideal solution for those who want more flexibility, and who are happy to take the good times with the bad, however.
No matter what your reasons for becoming self-employed are, you will need to register the fact with HMRC in order to ensure that your tax and NIC contributions (and potentially VAT if you are also registering for that) are calculated and paid correctly and on time.
But this is where many people begin to feel that being self-employed is actually pretty difficult! We’ll be honest and say that the HMRC website is a confusing one when it comes to registering for the right thing at the right time.
There is a leaflet entitled SE1 ‘Thinking Of Working For Yourself’ which can be downloaded from the HMRC website. It details the initial requirements that anyone who is considering becoming self-employed will need to complete. It can actually even be of use to those who have already started their own business; it is never too late to go back and fix anything that may not be quite right.
This leaflet can help you go through the steps needed to register correctly on the website. Registration as someone who is now self-employed should be done as soon as possible after you start working for yourself, and, if you don’t notify HMRC about your change of situation, you could be liable to some hefty fines.
This is especially true when it comes to tax and Class 2 NIC contributions. For some who are working in an employed status at another job whilst also working for themselves on their own business, tax may be a confusing and possibly contentious issue. They will already be paying Class 1 NIC through their employment, but this does not mean that they should not also pay Class 2 NIC, and therefore they must register.
It is not essential for everyone who is self-employed to register for VAT, although it can be something that people do like to do even when they don’t need to. Yes, it is another tax, but it also means you can claim money back on some purchases. Plus it often lends a level of professionalism to small businesses. If you are turning over £83,000 or more per year, then registering for VAT is compulsory.
If you employ others within your business, then you may also be required to register for PAYE.