Whether you are already employed or not, you may decide you want to set up a self-employed business. There are certain tax stages that ened to be considered when starting on the self-employment route.
Registering for self-assessment
Once you are self employed and your income is over £1,000, you register with HMRC as being self-employed. You will need to complete a self-assessment tax return in future. You will be given a UTR (unique tax reference). As a self employed you need to pay your own income tax in future.
National Insurance
As well as your income tax, you will also need to pay your own National Insurance Contributions. This will be Class 2 and Class 4 NIC. Depending on your taxable profits, depends on how much you will need to pay. Both these NI contributions are paid through your tax return.
Bank accounts
It is advisable to have a separate bank account for your business. This is to ensure your record keeping is well kept and in the event of a HMRC enquiry, you only need to supply the business bank statements without all your personal data as well.
Your self employment accounts must run to 31st March or 5th April annually. Your income is accounted for on a cash basis, i.e. you only pay tax on money and expense you receive and pay.
VAT
If your turnover exceeds £90,000 you will need to register for VAT. This limit is calculated on a 12-month rolling period. You have the option of registering for VAT before reaching this limit.
Please always seek professional advice before taking any action. We are happy to answer questions in future issues. Please send your questions through the contact us page on our website: www.champconsultants.co.uk
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