If you’re planning on removing yourself from the rat race and registering as self-employed, or even do a bit of freelance work on the side then there are some boxes you need to tick to make sure you stay in HMRC’s good books.
Failing to do so will not only make your life more difficult, but it’ll also bring the risk of hefty financial penalties! Here’s how to get everything in order.If you'd rather watch a video, we have this episode from our jargon-free Take the Leap series, entitled 'Setting Up & Registering Your Business'.
First thing's first though - your old job. If you're still employed while you're setting up your business, you can check out our tips on how to set up a small business while working on the side. You might also benefit from our "How to quit your job" article, if you've already reached that stage.
As soon as you become self-employed, you need to get registered. Even if you don’t find work for six months, it has to be done from the off. This includes freelancing on the side – any paid work you’re doing that doesn’t have tax already deducted counts as self-employed, and you can keep on top of this by using our online tax calculators.
The good news is that simply registering as self-employed doesn’t mean any extra work for you just yet, it just ensures HMRC are kept up-to-date in as much detail as possible. Failure to register could bring with it a £100 fine!
Registering as self-employed
If you’re going to be working through a limited company things could get (just a little!) more complicated - you may need to work out how much dividend tax you owe, or your might need to calculate the capital gains tax you'll need to pay. We’ve got a separate article that explains all you need to know about how to set up a limited company.
If you’re going to be working as a sole trader then there are two options available. The first is to do it online by going to the Gov.uk site. The whole thing is pretty straightforward, just follow the process and you’ll be registered as self-employed in no time. You’ll now be registered up until the point you de-register (if you ever need to). You won’t need to re-register each tax year.
You can also, if you’re willing to face HMRC’s call centres, complete your registration by calling 0300 200 3500. They’ll take you through everything and get you set-up straight away.
Things to keep on top of while you’re self-employed
Obviously you’re going to need to cover the costs of running your business. Then you’re going to make sure you’re keeping track of your accounts, including receipts, invoices, income and expenses. Of course, you’ll need to register for Self Assessment online, file your return and pay your taxes each year.
So that’s pretty much it - you’re now registered as self-employed, and ready to take the freelancing world by storm! All that you need to do now is find some clients, we’ve got a few resources to help such as our contractor job hunt checklist or our article freelance job sites that actually pay well.