Registering a sole trader in the UK is not a complicated process. The UK system gives the entrepreneur 3 months to register the business and the procedures are really simple. What’s more, self-employed means a number of benefits for you, such as a high tax-free amount and a long accounting period. So how does registering as self-employed work and when does it work for you?
When is registration as self-employed required?
Self-employment registration in the UK is required to legally run your own sole trader business. You can set it up if you have UK resident status. When starting your own business, you don’t have to register straight away – you have up to 3 months to do so. This is the maximum period within which you must register. Remember that you must have all receipts and invoices issued during this period.
Is it worth registering as self-employed?
The main benefits of operating in the UK as a self-employed business are:
- A high personal tax-free allowance (which increases year to year)
- Low National Insurance contributions
- Long tax reporting period
- Simplified accounting
- Eligibility for a UK pension
- Ability to deduct certain costs from taxable income
A sole trader also means you have full control over all your business activities. You can fit your schedule around your other responsibilities. Self-employment also gives you the opportunity to run several different projects at the same time. This is why it will work especially well for freelance activities – for example, if you want to earn money as a photographer, graphic designer or programmer.
How to register as self-employed
Registering for self-employment is not complicated. At the outset, check that you meet the conditions to start as a self-employed person, i.e. that:
- Running your own business
- Selling services or goods for profit
- Receiving payment agreed upon with your client
- Organizing your own work
- Being responsible for the work performed
To register as self-employed in the UK, you need to contact HMRC. You have a choice of 3 methods, depending on your situation.
If this is your first time registering for self-employment without having previously submitted a tax return, you can complete the entire process online. You will simultaneously register for Self-Assessment and National Insurance.
If you have previously filed a tax return, you must register using form CWF1, maintaining your existing Self-Assessment account.
The final option applies if this is your first time registering as a sole trader. You can also use form CWF1 for this. The information you’ll need includes:
- Personal details
- National Insurance Number (NIN)
- Phone number and email address
- Date you started trading
- Business address
- Type of business activity
Once you have completed the registration process with HMRC, you will receive a UTR number which will enable you to log into your personal account on the HMRC portal. The registration process takes around 10 days. Also, already at the start of your business, think about setting up a business bank account.
What responsibilities do you have after registering as self-employed?
As a sole trader, you must keep records of your expenses and income throughout the year. Additionally, you will need to submit a Self-Assessment tax return to HMRC annually.
You are also responsible for paying income tax and National Insurance Contributions (NIC). If your turnover exceeds £85,000, you must register for VAT in the UK within 30 days. However, you may want to consider voluntary VAT registration before reaching this threshold, depending on your circumstances. Additionally, if you operate in the construction sector, remember to register for the CIS scheme.
Rely on specialists to guide you through the self-employment registration process
The UK system seems transparent and as simplified as possible, but registering as self-employed still requires basic knowledge of tax law and contacting the authorities, which many people find difficult and stressful. However, our office can register your company for you. We will complete all the necessary formalities and handle the accounting of your business properly. Avoid possible mistakes, penalties and unnecessary stress. Instead, gain extra money and time to develop your business.
