Registering as self-employed

When you are self-employed you are technically working for yourself and hence are responsible for paying your Income tax and National insurance. This means that you need to inform HMRC that you are now self-employed which you should do as soon as you have completed your first freelance job. Although you do have 3 months to let HMRC know that you are self-employed, you will be issued with a £100 late notification fine if you exceed this grace period.

Registration can be done using the HMRC online registration form or the Newly Self-Employed hotline. Note that if you complete the registration online, you will need to gather all your personal information before starting. Once the registration process has been stated you will to complete it at that time. You cannot save any of the details on the HMRC website and once the session expires you will have to start from the beginning again.

Information needed for Registration

The following information will need to be provided to HMRC during the registration process:

  • 1. Name
  • 2. Address
  • 3. National Insurance number
  • 4. Date of birth
  • 5. Contact telephone number
  • 6. Contact email address
  • 7. Date that you became self-employed – you have 3 months to let HMRC know that you are now self-employed
  • 8. Nature of your business
  • 9. Your business address

Other information that may be requested will depend on whether the following situations apply.

  • A Unique Tax Reference (UTR) may be requested if you have completed self-assessments before
  • The UTR of the business where you are joining a partnership which already exists
  • The full name and date of birth of any business partners.

Self-Assessments and National Insurance Contributions (NICs)

When you become self-employed, you also have to register to pay National Insurance contributions (NICs) categorized as Class 2 or Class 4 depending on your profits which are calculated by deducting expenses from your self-employed income. If your profits are £5,965 or more a year then you pay Class 2 NICs. If your profits are £8,060 or more a year then you pay Class 4 NICs. These are normally paid through Self-Assessment where the amount of NIC is determined by profit levels. The Class 2 NIC rate for the tax year 2016-2017 is £2.80 per week.

There are exceptions to this rule. No NICs need to be paid for some specified such as examiners, self-employed in the property business, ministers and investment consultants who do not make commission or run a such a business. If your profits fall do not reach the Small Profits category i.e. you do not make more than £5,965 profit a year, than no NIC is due. In both these cases though a voluntary contribution to NI is advised as it will affect your State Pension and other benefits.

You need to register for Self-Assessment by the 5 October. To register for Self-Assessment which can be completed online, you will need your Unique Tax Reference (UTR). This also applies if you are a partner in a partnership where you will need the partnership’s UTR to apply for online Self-Assessments.