Everything you need to know about tax if you’re self-employed


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Being self-employed certainly has its benefits. You have the ultimate control over your career, you can work on projects that suit you, when and where you like. Plus you get to keep all the money you make after you have paid your taxes. Although being self-employed seems like the dream, you do have to make sure you manage a lot more than just the regular showing up to work – this includes paying all your bills on time and making sure all the taxes that need to be paid are done so. Knowing exactly what is due and when can be difficult, but have a read of our guide to self-employment taxes below to get a clear view on what you need to cover.

Are you really self-employed?

First of all, you have to work out your employment status. For some this is easy – if you are working for someone else and they pay your national insurance and taxes on your behalf via PAYE, then you are an employee. But for others, it’s not so clear-cut. What’s your status if you work for someone in one job, but have your own, different job elsewhere? If you are not sure then you can use HMRC’s Employment Status Indicator to find out.

If you are self-employed…

You need to make sure you tell HMRC as soon as you become self-employed. This is to make sure that you are not missing any National Insurance payments. If you fail to register in time (you have until the 5 October after the end of the tax year that you need to file a tax return for). If you register too late you run the risk of having to pay a fine.

How much will you pay?

This varies depending on your income but you will probably have to pay National Insurance contributions and income tax. Not sure about how much National Insurance you have to pay? Have a look at the rates here.

What about VAT?

Some self-employed people have to register for VAT. This depends on the type of business you do. Even if you don’t need to register you might find it beneficial to do so voluntarily. If you do then you will have to pay HMRC some of the VAT you collected, but you may also get to keep some yourself. It’s imperative that you keep all your records up-to-date and not lose track of where your accounts are, as you will need this information to work out exactly what you owe to HMRC.

Tax returns?

Every year HMRC will write to you informing you to complete your tax return. You can do this online or via a paper form. There is a deadline for when you have to complete your return and another deadline for when you need to pay your tax. If you have queries about your return you can get help here.

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