How To Register as Self-Employed in the UK

Not sure where to start? Read our comprehensive guide for how to register as self-employed in the UK with valuable insights and practical advice to help you navigate the registration process smoothly.

How Do I Become Self-Employed?

The moment you start working for yourself, you’re classed as a sole trader. This means you’re self-employed, even if you have not yet informed HM Revenue and Customs (HMRC). 

You’re probably self-employed if any of the following apply to you:

• You run your business for yourself and take responsibility for its success or failure.
• You have multiple customers at the same time.
• You have the freedom to determine how, where and the working hours for your tasks.
• You have the option to hire other people at your own expense or delegate the work.
• You provide the main tools and equipment required to carry out your work.
• You are accountable for finishing any unsatisfactory work during your own time.
• You charge an agreed fixed price for the services you offer.
• You engage in the sale of goods or services to make a profit.

Many of these also apply if you own a limited company, but you’re not classed as self-employed by HMRC. In this case, you’re both an owner and an employee of your company. 

Do I Have to Register as Self-Employed?

It’s very important to register as self-employed once you start running your own business. This ensures HMRC is aware of your earnings and can therefore accurately charge the right amount of tax. 

Legally, you need to register by the 5th of October following the end of the tax year in which you began your self-employment. For example, if you started your business in June 2022, you’d need to register with HMRC by 5th October 2023. It’s highly advisable not to delay your registration until this late stage if possible. 

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Is Being a Company Director the Same as Being Self-Employed?

There has been long-standing confusion about the difference between self-employment and being a director of a limited company.

When someone starts working as self-employed (sole trader) and their business starts to develop, the next step is to consider incorporating and delivering services through a limited company. Once someone starts to work through their own company, they’re no longer self-employed, even though they may carry on doing similar work as before. 

How Do I Register as Self-Employed?

The very first thing you’ll need to do is to inform HMRC and register by the 5th of October. You could risk a fine if you do not. If you haven’t previously registered as self-employed before, then you should follow these steps: 

1. First, register online by creating an HMRC account.
2. After signing in, you will receive a user ID.
3. Log back into your HMRC account, select "add a tax," and then click on "Self Assessment."
4. From the options available (individual, sole trader, partnership, or trust), choose "Sole Trader".
5. Enter the date you started your self-employment.
6. Provide additional details, including your National Insurance Number.
7. Describe the nature of your work, such as “Uber driver”, “freelance designer” or “security guard”, etc. 
8. Don’t forget to review the information provided before and then click "submit."
9. You will receive a letter by post containing your Unique Taxpayer Reference (UTR) number. You’ll receive this sooner in your personal tax account or HMRC app too. 
10. Within 10 working days, you will receive another letter with an activation code. This code is required to activate your UTR.

Alternatively, you have the option to do this using the SA1 form which is available to download from the HMRC’s website. Fill it in, and send it by post. Bear in mind that this method may take additional time for HMRC to process.

If You’ve Sent a Tax Return Before

The process is similar, but instead, you’ll use the online CWF1 form which will allow you to declare the information HMRC needs to know about your business. Just use the same 10-digit unique taxpayer reference (UTR) number and HMRC login as last time.

If You Work in the Construction Industry (CIS)

HMRC applies different rules to subcontractors who work in the construction industry, such as builders, painters, carpenters, and others.

If you work in the construction industry, let HMRC know and register for the Construction Industry Scheme (CIS). Failure to do so will result in a higher tax rate of 30% instead of the standard 20%.

If You’re Employed

There are situations when employed people may also be required to register as self-employed. 

For instance, if you have taxable income from self-employment in addition to your employment, you’ll still need to register as self-employed. Even though your employed wages are subject to taxation through PAYE, you must still report this income on your tax return. 

Moreover, if you earn an annual income over £100,000 from your job, you will also need to register for Self Assessment and file a tax return.

After You’ve Registered as Self-Employed

After registering for Self Assessment, it is important to make sure that you:

• Keep track of your invoices and receipts.
• Use Xero accounting software to keep on top of your admin and streamline all bookkeeping, tax and payroll processes. 
• Pay tax by completing a Self Assessment tax return before the deadline of January 31st every year.
• Pay Class 2 National Insurance Contributions (NICs).
• Pay Class 4 National Insurance Contributions if applicable. 
• Register for VAT if your self-employment income exceeds £85,000 or more. 

Remember that when registering for self-employment, you’re automatically enrolled in Payment on Accounts. If you’re unsure about how this process works or why your initial tax payment was 50% higher than expected, get an accountant from day one and take a look at how much tax we’ll save you. 

What Insurance Do I Need as Someone Self-Employed?

Once you start working for yourself, it’s important to consider your personal insurance options. This is because when you’re self-employed you don’t have an employer to rely on for sickness cover or health insurance. Because you’re working for yourself, you won’t get sick pay, although you may qualify for state benefits. 

Besides critical illness cover, as self-employed, you may also consider personal insurance, income protection and life insurance. Many sole traders consider income protection and critical illness cover in case they get a serious sickness or are injured and unable to work. This way, if earnings drop because of this, your payouts will continue until you’re able to return to work or the policy ends. 

How To Stop Being Self-Employed

If you want to stop being self-employed, you will need to inform HMRC about the change in your circumstances. To do so, you will need to fill out this online form and mention that you’re no longer self-employed in your Self-Assessment return by simply ticking a box. You’ll need your National Insurance Number and your UTR number. 

If you don’t inform HMRC about the change in your self-employment status, they will continue sending you a tax return every year. Don’t overlook these tax returns or you could be fined about £1,600 if you’re a year late. HMRC will still expect you to pay tax and they’ll generate an “estimated tax bill” which is legally due and you can only cancel it within 3 years. 

How Pineapple Can Help

If you just started your journey as a sole trader, at Pineapple, we’re a dedicated team of online certified chartered accountants, ready to support you through this new and exciting venture. We offer a wide range of digital accounting services, including bookkeeping, tax and VAT returns, starting from as little as £25 a month.

Get a quote today or check out our fixed monthly plans which will provide additional flexibility and peace of mind. If you want more information, contact us via WhatsApp to chat with an advisor.