How to Register as Self Employed in the UK
Have you started working for yourself? Congratulations on taking the leap into self-employment. When you start working for yourself, the UK government classifies you as a sole trader even if you’ve not told the HM Revenue and Customs (HMRC).
Before you get stuck and get fined by the HMRC, you need to register as self-employed. Want to know how you can register as self-employed in the UK? in our step by step guide, we explain how to register as self-employed in the UK.
Why Do I Need to Register as Self-Employed in the UK?
According to the UK government, you’re self-employed if you…
- Decide where, when and how you do your work
- Can hire people to help you at your own expense
- Can run a business for yourself
- Can take responsibility for the success of the business
- Sell goods and services to make a profit
- Have several customers buying your products and services
- Charge your customers an agreed fixed price for your work
Many of these also apply when you own and run a limited company, but the HMRC does not classify you as self-employed. Instead, the HMRC classifies you as the owner and employee of your limited company. There are several reasons why you should register as self-employed.
First, registration as self-employed is a must for tax and National Insurance purposes. Also referred to as self-assessment tax, the HMRC does not deduct from your income when you receive it. This is unlike employees who receive a payslip where the HMRC deducts tax from their wages via the PAYE system. As self-employed, the HMRC requires you to declare your income from self-employment every tax year.
Second, when you register as self-employed, the HMRC can track your tax returns. The HMRC requires you to calculate your tax from the total income earned during the tax year and remit the returns before the deadline. To do this, you need to keep records of your business expenses and sales.
What you need to know is that not everyone working for themselves needs to apply for self-employment. The HMRC classifies you as a sole trader if you’re selling to make a regular profit, make items to sell for profit and sell items online for a profit. Also, if you earn a commission from selling goods or get paid for a service, you’re a sole trader.
You must have earned more than £1,000 from self-employment to register as self employed. This does not mean that you should not register if you earn less than £1,000. Your turnover may increase beyond this. If you register early, you avoid potential penalties and fines.
When Should I Register as Self-Employed?
You need to register as self-employed with the HMRC on 5th October in your business second year. For example, if you started your business on 1st April 2020, you’ll need to register with HMRC before 5th October 2021.
The tax year runs from 6th April one year to 5th April the next year in the UK. If you fail to register on or before the deadline, it means you’ll not file your self-assessment tax returns. As such, the HMRC will fine you £100 for missing the 31st January deadline.
If you are three months late, you’ll incur a £10 penalty per day up to a maximum of 900 pounds. If 6 months to 12 months late, the HMRC will penalise you 5% of the tax due up to £300.
What Information Do I Need for Registration as Self-Employed With HMRC?
Registration with the HMRC as self-employed is easy. Here is what you need…
- Your Name
- National Insurance Number
- UK Address
- Date of birth
- Email Address
- Phone Number
- Business Start Date
- Business Address
- Business Phone Number
The HMRC will also require you to provide a brief description of what you do.
How to Register as Self Employed with HMRC
There are three ways for registering as self-employed with HMRC. They include…
To register online with the HMRC, head to the HMRC website, enter your email address and click “Continue.” Fill in the following details: National insurance number, date of birth, gender, name, address and phone number. Complete the questions and submit the form.
Once you complete the form, the HMRC will create your account.
The HMRC allows you to register by post. All you need to do is fill a form on-screen, print the form and mail it by post. The HMRC on-screen form requires similar information such as your…
- National Insurance Number
- Phone number
- Address and more.
You need to know that you can’t save the form. But upon filling in all the details, you can print and post it. The HMRC recommends that you use this form if you’re unable to register online.
You can call the HMRC on 0300 200 3500 to register as self-employed. Before calling, make sure you’ve your National Insurance Number at hand. If you have any questions about your application, contact the HMRC helpline on 0300 200 3310.
How Long Does It Take for HMRC to Process Your Application?
The HMRC usually takes 7 to 10 days to approve your application. In certain circumstances, there may be delays. To get an up to date estimate of how long your approval will take, contact HMRC helpline on 0300 200 3310.
In normal circumstances, you’ll receive a letter from the HMRC within 10 days. In the letter, you’ll find your 10 digit Unique Taxpayer Reference number. If you live abroad, the letter may arrive within 21 days. The UTR is for filing self-assessment tax returns.
You’ll also receive another letter from the HMRC containing your activation code. Activate your account using the code.
I did not receive the second letter? What should I do?
If you fail to receive your activation code, get a new activation code online. Once your self-assessment account is active, you can file returns every tax year before the deadline.
Applying for Self-Employment if You’re Registered for Self-Assessment
You may file a tax return for other reasons. For example, you have a dividend income or have a house that you rent out. If you filed tax returns for the reasons above and more, you don’t need to apply for self-employment again.
If you register again, the HMRC system will set you up again. As such, the HMRC will expect two returns every tax year from you. What you should do is complete the CWF1 form.
How to Complete the CWF1 Form Online
The CWF1 form re-registers you for self-employment. You can appoint an authorised agent to fill the form on your behalf. The authorised agent must have authorisation from HMRC via the online authorisation service or form 64-8. Alternatively, you can complete the form.
You need the following information:
- Personal details such as name, address and phone number
- Business details such as name, address, postcode and phone number
- National Insurance Number
- UTR Number
To complete the CWF1 form online, head to the HMRC website, and you’ll find the latest version. Fill in the details, review the form and submit.
Once the HMRC approves your application, file your self-assessment tax returns every tax year. To file your tax returns, you must prove your identity using Government Gateway or GOV.UK Verify.
Remember, you don’t have to complete your self-assessment tax return in one go. You can save your entry and complete it later. Just make sure to complete the tax return before the end of the tax year (5th April).