However, being self-employed means you are responsible for your own accounts and must submit tax returns to HM Revenue and Customs (HMRC) each year. You can get an accountant to do the work for you, but they will charge a fee, of course.



Registering as self-employed
 
When you first start working for yourself, you must register with HMRC - a form is available here.

There's also a helpline for the newly self-employed which you can call to register: 08459 15 45 15



Paying tax

You'll need to account for your income tax using a scheme called 'self-assessment'.

Each year you must send a form to HMRC by the end of January with details about your income up to April 5th of the previous year (for tax purposes the 'year' runs from 6th April to 5th April the following year).

You can get more details about paying tax and making your tax return by clicking here.


 
Paying National Insurance Contributions (NICs)

People who are self-employed usually pay 2 kinds of NICs: Class 2 and Class 4. You pay class 2 contributions (currently at £2.20 per week) as a kind of basic contribution (though you may be given exemption if your earnings are below about £4,000). You normally pay Class two contributions each month, and can pay by direct debit.

When you've completed your accounts and sent them to HMRC, you'll have to pay income tax plus Class 4 NIC contributions which are based on how much profit your business has made.

If your business has made less than £5,225, then you will not pay any Class 4 NICs. But if your business has made between £5,225 and £34,840, then you'll pay 8% of your profits in Class 4 contributions. And that is on top of any income tax you have to pay.


 
Using an accountant

Many self-employed people can manage to look after their accounts during the year without any problems. They send out invoices, keep records of all the bills they've paid and make VAT returns (if they are registered).

Calculating your profit after the end of the financial year and completing your tax return is not quite as simple - even though you can get advice from HMRC.

So, many self-employed people take their records to an accountant who will calculate their profit, fill in their tax return and work out how much tax and NICs they need to pay.

Of course, accountants charge a fee. Shop around and ask accountants about their fees before you decide to use one. It's often a good idea to ask friends, relatives or ex-colleagues to recommend one.
  
 
 
 
 
 
  

Self-employment

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Working for yourself, e.g. as a plumber, carpenter, or a
freelance designer, is called 'self-employment'. You are
your own 'boss', and to many people that is very attractive.

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