If you belong to the UK self employed category, you have the responsibility of paying the National insurance and your own tax dues. You will have to maintain all your business details and records regarding your income to file the tax return for the annual self-assessment. You will also be required to register to a value added tax or VAT.
Let us go through the various steps of UK self employed responsibilities.
Registering with HMRC
HMRC is the HM Revenue and Customs with which you are supposed to register yourself as self-employed at the earliest though you may fill tax return every year. This is a very essential step, as ignoring this would cause you to pay the initial penalty.
The registration can be done in different ways, which include:
- You may register online through their website as self-employed.
- You call the Helpline – 0845 9145 515, anytime between 8:00 am and 8:00 pm between Monday and Friday and on Saturdays between 8:00 am and 4:00 pm and ask for help regarding the registration.
- You may download the CWFI form and complete it to register for the tax and National insurance.
Self-Assessment and Income Tax
Once the initial process of registration is over as a UK self employed, you will have to provide details of all your income for the entire tax year, which is between April 6th and April 5th in the self assessment tax return form sent by the HMRC.
You can file your returns or find anything you want such as basics of tax, UK self employed tax returns, or self-assessment, in the websites.
Contributions to National Insurance
You, as a UK self employed, is expected to pay a National Insurance Class 2 and if your yearly profits exceed a certain limit, you will have to also pay the Class 4 Insurance.
National Insurance – Class 2
A flat rate of £2.40 is to be paid as Class 2 insurance if your annual income is over £5,075.
Also, this class of insurance is taken into account for some benefits like Maternity leave, State pension, Bereavement, etc. However, they are not taken into account for the statutory sick pay, Jobseeker’s allowance or additional pension. You may therefore have to arrange for your protection insurance or personal pension.
Payment for Class 2 National Insurance for the UK self-employed can be made through quarterly bills or monthly debits through the official website.
Exceptions: If your annual income is less than £5,075, you may be exempted from paying the Class 2, if you apply for a certificate for the same provided, you are ready to forego the state pensions and other benefits.
National Insurance – Class 4
As a UK self-employed, if you earn an annual profit ranging from £5,175 to £43,875, you are expected to pay 8% on the profits and an additional 1% for extra profit that exceeds the profit shown.
VAT or Value Added Tax
The VAT threshold is £68,000 and if you exceed the limit, you should register for VAT and this is extremely beneficial even if the turnover comes down.
Have an account and find information through the VAT HMRC’s Helpline – 0845 0109 000 between 8:00 am and 6:00 pm between Monday and Friday.
It is very essential to maintain all records of income, as a UK self-employed, to file the tax returns. Hence, maintain all records of:
- Invoices of purchases and sales
- Bank records
- Transaction receipts
Executing all responsibilities of a UK self-employed saves you the time and helps you focus on your efficiency and success.