Becoming Self-Employed

If you’ve decided to stop working for someone else and you’re in the process of setting up your own business, then you’ll need to tell the HM Revenue and Customs that you’ve become self-employed.

A sole trader is a person who works for themselves and trades goods or services. For example, a self-employed electrician or someone who is running a cup cake business.

Working for yourself means that you can set your own working hours, take on staff to help you, build up your customers and be responsible for all aspects of your business.

If you work for someone else during the day and in the evenings you have a business like a catering company or you sell on eBay, then you are working as self-employed in the evening.

As a self-employed person you will need to keep paperwork in order to record your income and expenses. This is necessary for when the time comes to fill out your self-assessment tax form and pay your national insurance.

There are two methods of keeping records of your accounts:

Traditional Accounting – This is keeping a record of your expenses and your income on the day of the invoice.

Cash Accounting – You record your income or your expenses when you receive a bill, so money that you have invoiced but haven’t received won’t be included yet.

If you want to know more about accounting methods and your tax, talk to Magpie Accountancy and they will give you any help and advice you need.

It is best to register to pay your tax and national insurance as soon as possible after you go into business for yourself. The latest you can register is by the 5th October in your second tax year. For example, if you start trading between April 2015 and March 2016, you should register by the 5th October 2016.

Don’t worry if you miss this date though, you won’t be fined as long as you get your self-assessment tax return sent in on time.

New sole traders who have never had to fill in self-assessment tax forms before, register as a new business. Once you’ve done this you will be sent a ten- digit unique taxpayer reference. It normally takes about ten days.

If you have filled in self-assessment tax returns in the past, then you can keep your old self-assessment account and your 10-digit unique reference.

If you are unsure about any aspect of your tax or national insurance, Magpie Accountancy can help you. Get in touch by using our contact page, or call the office on 07957245760.