How To Become Self Employed From Nothing in UK

How To Be Self Employed And Deal With The Taxes in UK

I’ve mentioned Wealthy Affiliate before on several ocassions as the best way to start your own business online. If you want to get back to my review you can do it HERE. I’ve also talked about PROS (HERE) and CONS (HERE) of being self employed.

Today I would just like to talk about starting your business from the universal point of view, cause you can do several different things that you will need to register as self employed person. You can offer people your services in pretty much any given department – you can be a cleaning person, a recruiter, an interpreter or anything really.

What those things have in common is this – you will have to register as a self employed person with your country’s revenue office.

In my case – it is British HMRC and I can tell you it really is easier these days than it used to be.

First of all  – it is all done electronically now. You can do it all at home without leaving the house once. And you don’t even need an accountant.. At least not at the start up stage.

Firstly you need to go to the government’s website, find Government Gateway and register there. (Make sure you make a note of your login and password somewhere as you will need it in the future (preferably not computer note, but somewhere handwritten in a safe place as computers get hacked into)

Then you need to apply for your UTR (Unique Taxpayer’s Reference) It can take them up to few weeks to send it, so don’t panic if it doesn’t arrive right away.

It will arrive by an official letter. Make a note of your UTR as you will need it every tax year from now on.

Tax year starts each April and ends each March so by tax year government means that period of time. Each end of January you are meant to pay for last tax year that ended previous March (for example on January 2018 we will pay all the taxes that we owe for earning period of April 2016 to March 2017.

Which means that first year you are doing your taxes will probably be very easy to start with as you don’t fall on that tax wagon right away.

Then another good news is – you are not actually calculating anything yourself – the electronic system does it all for you. All you need is all your documentations of your profit and basically any financial relevant documents or notes and you can do your own taxes and insurance deductions yourself, providing you have a computer, internet and you collect your P60s and P45s  (This reffers to people who are starting their own business while still employed by someone else as well) If you are just self employed you will not have or need the following documents, but you will need your receipts and invoices for the given year.

P60 – You should be given your around May each year by your employer – it is a form that staes exactly how much you’ve earned with them for the last tax year and how much tax and other deductions was paid to you. If you are not given it by June, you should request it – they are obliged to provide it for you. There is no terrible rush though as you have time  – you only have to do and pay your taxes by next January.

P45 is a form that you only get at the end of employment so you only need to concern yourself with it if you have left an employment within previous tax year. Everyone who ends a legal employment should receive one of those – if not , again you need to request it. You even need one if you have been on Jobseeker’s Allowance -Jobcentre Plus needs to provide a P45 after you stopped receiving the benefit. I’m pretty sure it goes for ALL UK benefits.

 

If you travel for business or had to invest money in training or equipment that is useful or even essential in your business, you should make sure you input that in your tax return as well as it can save you quite a sum when you add it all up.

You need to remember to inout any other income that you are getting, not just business related. You can be earning money for several different things/businesses – HMRC will need to know about all of them.

There is such a thing as a tax free allowance – each person is eligible for not paying tax until they have reached 11000 pounds yearly income. It changes every year, but in tax year 2016/2017 it was 11000 and this year (2017-18) it will be 11500. It means you do not pay any tax on ernings up to that amount. You only start paying 20% tax on any income exceeding that amount.

So if you earned 15000 this year 2017-18 you will only pay tax on the amount of 3500 (15000-11500 of tax free allowance) Of course the government Gateway site will calculate all this for you automatically, but it is good to understand how it works and why.

IMPORTANT –  Even if you only earned very little on a given year and you have not reached a tax free allowance amount, you still need to report and input ALL your earnings to the HMRC. They will not chargé you tax for anything below the tax free allowance, but they still need to know about it.

There is also a insurance fee for self-employed and it is 2.80 pounds per week. This is paid to HMRC regardless of your income or lack of it. They sum it up yearly and then you need to pay around 146 pounds per whole year.

General advice and summary

1) Keep a clear track of all your earnings – even bank interests counts. The best way to keep track of your earnings is to simply save all your bank statements somewhere – electronically or in the form of hard copies, whichever you prefer.

2) Keep a clear track and proof of your business costs that can be deducted from your tax. Any travel or training bills, any business related purchases should come with some sort of bills or invoices you need to keep for few years for records.

2) Don’t keep your financial information or passwords on a computer file – hackers like those files and they can try to use your information to hack and steal from your bank account.

3) Start a notebook and put all your important information there like Government Gateway password and login, your UTR, your earnings etc. Keep it somewhere safe.

4) If you’re still employed by someone else – keep all your wage slips, P60s, and P45 if you have any.

 

 

 

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