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Tax Advice for the Self-Employed
Step One: Register with NI and HMRC
If you work as a self-employed person in the UK, there are a few more things to take into consideration. Register with National Insurance first to take care of your social security contributions. After that, you must register for business taxes with the HMRC.
This online service allows you to register for Self-Assessment (and your staff for PAYE tax payments) if you are truly self-employed, a sole trader, or one of the parties in a business partnership. Limited companies have to register online for corporation tax instead.
To register for Self-Assessment, you need to provide your NI number and your current contact details. In case you have ever paid tax in the UK before (e.g. on a previous job), you must include your existing Taxpayer Reference Number. Make sure to mention the date when your new status has made Self-Assessment necessary, for example the day you started out as a self-employed doctor with your own office.
Step Two: File a Tax Return
After registering for Self-Assessment, you have to wait for a letter from HMRC to confirm your registration. Then you have to file your tax return by the usual deadline (31 October after the previous tax year for paper returns, 31 January for an online Self-Assessment).
Allowable expenses in your Self-Assessment include the costs of goods that you sell, wages and salaries for your staff, rent and utility bills for your premises, postage, phone and internet bills, costs for advertising, insurance premiums, fees for your accountant, and many more. Don’t forget to include capital allowances on large expenditures (like a delivery van, office equipment, or machinery) as well!
Keep Your Business Records in Order
To make the Self-Assessment easier and to avoid trouble with HMRC, keep proper business records right from the start. After you have done your taxes, you have to keep your old records for at least another five years after the submission deadline of the relevant tax year, in case of enquiries by HMRC.
Business records should register all sales and takings, as well as purchases and expenses. Records can be cashbooks, invoices, receipts, till rolls, the payroll for your employees, bank statements, a rent book, the stock inventory, etc.
When it comes to expenses, you have to keep good track of purchases or sales of assets for your capital allowances. These may include the daily running costs of assets like machinery as well. When you take money or stock for personal use, or utilize business assets for personal purposes, you have to be twice as careful with the record-keeping. Always keep these two basic purposes carefully separate.
When in Doubt: Ask for Help
If you need support for completing your Self-Assessment, you can simply phone a HMRC hotline (0300 2003310 or +44 161 9319070 from outside the UK). However, when in doubt, hiring an accountant or asking a tax advisor is the best possible investment, as it may save you plenty of money and/or hassle later on.
Tax consultants also come in handy when dealing with matters of international taxation. We will introduce the latter on the following page.
We do our best to keep this article up to date. However, we cannot guarantee that the information provided is always current or complete.