Registering for Self-Employment

Once you have made the step of deciding to go self-employed once of the first things you need to do is to register with HM Revenue & Customs.

Registering for tax is an essential step in becoming a sole trader. It ensures that you are compliant with the law and can accurately report your income and expenses to HM Revenue & Customs (HMRC). To register, you will need to complete an online form on the HMRC website or call their helpline.

When registering, you will be asked to provide details such as your name, address, National Insurance number, and business start date. You may also need to provide additional information depending on your circumstances. Once registered, HMRC will issue you with a Unique Taxpayer Reference (UTR) number which you’ll use when filing your tax returns each year.

Bank Account

Once you have been issued with your Unique tax reference then you can set up your business bank account. I have known sole traders to use a personal account, but I would strongly advise against this in case of a tax investigation where HMRC will be able to see all your personal income and expenses as bank statements are one of the documents you may need to provide them with.

If you have a business bank account you will keep this separate and only business information can be seen on the statements when providing these to HM revenue & Customs, mortgage brokers etc.

National Insurance

You should also make sure that when registering for self-employment that HM Revenue & Customs have registered you for national insurance but his should be done automatically but it worth checking.

As a sole trader you will pay class 2 and 4 national insurance and paying class 2 national insurance will be paying your entitlement to state pension upon retirement.

By registering for national insurance, they have the date you started trading as a sole trader and if you make profit or a loss no class 2 national insurance are due, but you can pay voluntary contributions and this way you keep up your entitlement to state pension.

If you do fall behind in paying your class 2 national insurance, you can pay class 3 national insurance which are voluntary contributions, but these are more expensive than class 2 as you are paying these over later.

Penalties if you Fail to Register as a Sole Trader

Failing to register as a sole trader can have serious consequences. HM Revenue & Customs take non-compliance seriously and can impose hefty penalties. If you don’t register on time they will fine you Additionally, if HM Revenue and Customs discovers that you haven’t registered, they may also charge interest on any unpaid taxes.

To avoid these penalties, it’s crucial to ensure that you register as a sole trader before starting your business activities. By doing so, you’ll not only comply with legal requirements but also set yourself up for success by avoiding unnecessary financial burdens down the line. So, make sure to complete all the necessary steps promptly and accurately when registering as a sole trader.

Other Taxes

Ther are other taxes that you may need to register for as a sole trader, and these are VAT and Pay as You Earn but these will come as your grow and do not need to be done when registering for self-employment.

Making Tax Digital

Making Tax Digital in coming and when the government introduces this you will need to make your submissions of trading results through this.