What
When you start generating a self-employed income, you’ll need to let the UK government know by registering for self-assessment.
Why
Employees have tax deducted automatically via the “PAYE” scheme via their salary.
When you’re self-employed, you’re responsible for paying these taxes yourself.
You must register if you earn more than £1,000 in a tax year via self-employment (from 6 April to 5 April).
This is to ensure that you are reporting and paying the correct tax on your income.
If you do not complete a self-assessment tax return, you may be charged a penalty - even if there are no taxes due.
If you are not completing a self-assessment, you may end up paying an incorrect amount of tax, and there may be penalties for the late payment of any tax due.
Important to know
Whilst you do not need to register for self-assessment immediately, you must register by 5 October after the end of the tax year when you earned more than £1000.
It’s recommended you register for self-assessment as soon as you start earning as a freelancer.
Even if you’re incorporating a limited company, it’s likely you’ll need to register for self-assessment.
How
1/ Visit the gov.uk pages on registering for self-assessment. They have a very clear and easy to understand application process.
2/ Follow the steps, and you’ll be asked to create a business tax account. Make sure you keep the account details somewhere safe.
3/ HMRC will provide you with a “Unique Tax Payer reference”, which you will need to submit your self-assessment
4/ That’s it! HMRC will contact you when you’re due to submit your self-assessment tax return. Make sure you’re keeping good records in the meantime.
