How do I register as self employed?
Let just cover some simple terms that get used regularly. Sole trader, sole proprietorship, individual entrepreneurship and self-employed.
You may see any of these terms when completing documentation from the government.
“A sole-trader is a person who carries on business exclusively by and for himself, he is not only the owner of the capital of the undertaking, but is usually to organise and manage and takes all the profits or responsibility for losses.” James Stephenson emphasis that sole-trade business is carried on by one person with his own funds and according to his managerial capabilities. He is also responsible for the success or failure of this business.
So Stephenson commented that self-employment involves success and failure, and business is dependent on your own funds. We will come back to the risks and rewards of self-employment in another article, but where there are profits, there are taxes.
Do I have to inform anyone that I am self employed?
When you start out, you have to tell Her Majesty’s Revenue and Customs (HMRC) that you are generating income and that you will be reporting your profits each year, to be taxed.
It’s free to register and only takes a few minutes.
You’ll find more information and the links to register here: www.gov.uk/working-for-yourself
HMRC define self employment in the following ways:
You’re probably self-employed if you:
- run your business for yourself and take responsibility for its success or failure
- have several customers at the same time
- can decide how, where and when you do your work
- can hire other people at your own expense to help you or to do the work for you
- provide the main items of equipment to do your work
- are responsible for finishing any unsatisfactory work in your own time
- charge an agreed fixed price for your work
- sell goods or services to make a profit
Can I be self employed and employed?
Yes! This is becoming more and more common, where people have a side business such as people creating art and crafts in their spare time, whilst having a day job.
Your employer deducts your taxes, national insurance and pension as usual, and you submit a Tax Return along side this each year.
LLP, LTD and PLC – what do they mean?
You’ll have likely seen these terms, especially if you read the newspaper. Limited liability partnership, Limited Company and Publicly Limited Company are all legal ways of incorporating your business.
Put simply, as your business grows, you can create a legal framework where you and the company are two separate legal parties.
Each of these is used in a different way, depending upon your needs.
A limited company is the most common, with over 4 million registered in the UK. (According to Companies House)
We spoke earlier about the risk of small business, with a limited company, the exposure for directors or owners in event of the business failing are reduced.
Next, we will cover when you should register as self-employed.