When do you become self-employed?

Registering as self-employed only takes a couple of minutes, and it's free, but if you don't do it when you're not meant to, you could be breaking the law and be liable to pay a fine. Unless you're setting up a limited company, you need to register as soon as you are actively seeking work. You need to register even if you already fill out a self-assessment tax return.

When to register

    • You need to register as self-employed as soon as you are actively seeking work for your business. It doesn't make any difference whether you start bringing in money the next day or three years down the line - it's looking for work that counts.
    • You need to register at this point whether you are employed in another job or not.
    • If you don't register within three months of the end of your first month in business you could face a fine of £100.

Exceptions to the rule

  • You don't need to register as self-employed if you set up your business as a limited company. With a limited company, you are regarded as an employee of the business, so you only need to set up a PAYE system to pay yourself. Read more about limited companies.
  • Different rules apply to subcontractors in the construction industry. If this applies to you, you need to register with the HM Revenue & Customs (HMRC) Construction Industry Scheme. To find out how to do this phone the CIS Helpline on 0845 366 7899. 
  • In all other cases, whether you're going to take on employees or not, you need to register as self-employed. You can then set up a PAYE system for employees afterwards.

The responsibilities

  • Once you're registered as self-employed, you become a self-assessment taxpayer. That means that, if you don't already, you'll have to fill in a tax return each year, detailing your earnings and any other income you get. You'll need to do this whether or not you're employed in another job.
  • You'll also have to keep all financial records for your business. Find out more about business bookkeeping here.
  • You'll also have to start paying your own National Insurance Contributions (NICs). Read more about paying NICs here.
  • You may also have to pay VAT for your business - get more information on VAT here.

How to do it

You can register by:

  • Going online
    • Fill out this form to register as a self-employed sole trader
    • And this one to register as a partnership (your business partners need to register separately)
  • Calling HMRC's newly self-employed helpline: 0845 915 4515 (open from 8 am to 8 pm Monday to Friday, and from 8 am to 4 pm at weekends)
  • Printing out the form at the end of this leaflet, completing it and posting it to HMRC.

If you have an agent who will be completing the form for you, read the information here and make sure they've signed this form. You can register under your own name, or create a business name. Read more about choosing a business name here.

Registering in any of the ways above is quick and straightforward. If you have any problems, call the HMRC newly self-employed helpline on 0845 915 4515.

Checklist

If you're setting up as self-employed, make sure you:

  • Find out from HMRC whether you need any permits for your business
  • Register as self-employed
  • Set up a direct debit for or put money aside ready to pay bills for your NICs
  • Find out whether your business needs to pay VAT
  • Set up a financial record-keeping system
  • Put your name on all business stationery, such as invoices, receipts, cheques and letters
  • Find out if you need to pay business rates on your business property

FAQ

I'm not sure whether or not the work I'm doing counts as self-employment.
If you receive any payment for work where the person paying you isn't paying you through a PAYE system or they aren't working out your tax and NICs on the payment and paying them on your behalf, that work qualifies as self-employment. Check with whoever's paying you to find out.

I have a job but I'm starting my own business on the side - what's my status?
You still need to register as self-employed as soon as you start actively seeking work for your sideline business.

Should I register as self-employed or set up as a limited company?
To find out more about which type of company set-up will best suit you, read our guides on company formats.

Am I a sole trader if I register as self-employed?
No, not necessarily. You can be in a partnership and be self-employed. If you indicate you're setting up as a partnership when you register you will automatically be registered as a partnership. However, if you are the only person responsible for the business, you are known as a sole trader.

What if I'm going to take on employees and need to set up a PAYE system?
You still need to register as self-employed, unless you're setting up a limited company. You can then set up a PAYE system to pay employees.

What if I'm a freelancer or doing contract work and not sure whether to register?
You need to register as self-employed if the person paying you for work isn't paying tax on your behalf, or deducting it from your pay. Ask the person paying you about this - if they're not, you need to register and sort out your own tax and NICs.

I'm only going to be working for one company/client - am I an employee or self-employed?
If you are going to do all the work for one person or firm, you may actually qualify as an employee rather than needing to register as self-employed. You need to call HMRC's self-assessment helpline to find out your status - call them on 0845 9000 444. Or, visit your nearest HMRC office.

I know I'm not going to turn a profit anytime soon - do I still need to register?
Yes, as soon as you start actively seeking work. You'll still need to fill out a tax return too, even if you're not turning a profit yet.

Jargon Buster:

PAYE: Pay As You Earn (PAYE) is a system employers set up through HMRC to pay employees' tax and NICs automatically.

NIC: National Insurance Contributions (NICs) are regular contributions made to the government to cover the cost of public services such as the NHS, and to contribute to your state pension in the future.

Sole trader: A sole trader is one person who owns the business entirely, and takes personal and individual responsibility for accounts, debts and the running of the business (unlike a partnership, where control and liability for the business are shared). Sole traders can have employees.

Resources

  • HMRC leaflet giving an overview of self-employment and answering the main questions you may have
  • HMRC self-assessment helpline - 0845 9000 444
  • HMRC self-employment helpline - 0845915 46 55
  • HMRC VAT helpline - 0845 010 9000
  • The new employer's helpline - 0845 607 0143
  • PAYE helpline - 0845 607 0140

As soon as you register, HMRC will send you The Guide, a book designed specifically for the newly self-employed that tackles all the major issues like tax, National Insurance and record keeping

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