Kickstart Your Solo Venture: How to Register as Self-Employed

If you work for yourself in the UK and earn over £1000 a year, you must register as self-employed. This is so that you can pay tax, make NI contributions, ensure access to the New State Pension, and potentially pay VAT when applicable. Find out here the basics of registering as self-employed and where to look if you need extra support. 

How Do I Register as Self-Employed in the UK?

Working by yourself where you set your hours, set your rates, and are responsible for your own work means that you are a self-employed sole trader.

You can register online as a sole trader with HMRC here. You will be asked to provide your national insurance number, address, date of birth, and the nature of your new occupation. 

If you work with one other person — potentially as a husband-and-wife business where you juggle work with childcare — you will have to register as a partnership with HMRC here. 

For those who are self-employed in the sense that they run a larger company that employs others, you will need to register as a limited company and most likely have to charge and collect VAT. We will keep the focus on sole traders and partnerships for this guide. 

How Do I Name My New Business?

If you register as a sole trader as part of setting up as a freelancer, there are no restrictions on the registered name of your business. The name you submit to HMRC does not have to be linked in any way to your brand name, and as such does not have to be unique if you are working in a crowded market. Many opt to simply use some variation of their brand name or first and second name.

When Should I Register as Self-Employed?

If you project that you will make more than £1000 a year, you must register for self-employment. This is so that you can be accurately assigned the relevant tax code and pay into the system. While it may be tempting to delay this admin task, having up-to-date tax records and returns is essential for a number of reasons: 

• You are legally obliged to pay tax in the UK if you earn money here in the UK 
• A tax return is how you will prove your income in the absence of a contract of employment when you want to apply to borrow money 
• You can be charged backdated tax with fines and interest applied if you are found to have been avoiding tax at a later date 

Self-employed workers get their NI deducted as part of their annual tax return. You will typically have to pay your tax in January and then July of the calendar year after the end of the relevant tax year. There are also options to spread the cost by paying monthly. 

Will I Have to Pay VAT When Self-Employed?

Suppose the past 12 months’ total sales of taxable products and services exceed the VAT threshold (your total VAT taxable turnover goes over £90,000). In that case, you are legally obligated to apply for VAT status. You will then need to add your unique VAT number to all your invoices, collect VAT, and return it to HMRC.

You can check and register your VAT status here to ensure full compliance at all times. It should be noted that it is a criminal offence to collect VAT (regardless of how small the amount) if you are not VAT registered. This is seen as a form of fraud and can carry a custodial sentence. 

If you are disabled and unable to work, VAT relief is available. Follow the link to read our article and learn more about it.

What Help Is Available If You Are Self-Employed?

One of the downsides of self-employment is that you do not get the same benefits and protection that you would otherwise receive if you were an employee. For example, statutory sick pay is only offered to employees. However, there are some community-led cost-of-living support schemes designed to help those in self-employment. This is something that has become more widespread since the pandemic. Where possible, it is advised to take the following steps to avoid financial hardship and burnout: 

• Put aside 25% of your income to pay your tax bill at the end of the calendar year
• Create a savings account you pay into regularly so that you can afford to take time off
• Budget for summer holidays and vacations so that you can take time off to rest and relax 

What Guidance Is Available if You Are Self-Employed in the UK?

Citizens Advice offers a range of services that cover everything from financial literacy to guidance on how to find an accountant or bookkeeper. They can also direct you towards mental health and wellness professionals in your local area to help with the stress of being your own boss. If in doubt, be proactive and take action early to ensure that your needs are met and addressed in a timely fashion.

Making Sure You Are Complying with the Law  

Registering as self-employed will ensure you pay the right level of tax and can legally collect VAT. It will also allow you to pay your NI contributions and guarantee your access to public health care and a State Pension. Don’t forget to keep up to date with your tax returns to prove your income as a self-employed person. 

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