How to become self employed in the UK

today's video is predominantly about how do you set up to become self-employed in the UK you might have a business idea of how you can make some money and you want to take it to the next level and you want to properly set up as a business how do you do that well I'm gonna guide you through its dead straightforward to be honest and not something that is worth worrying about it's a paperwork exercise you know but other than waiting around for stuff to arrive in the post you can probably be done and dusted in under half an hour I would say so there are essentially three steps to becoming self-employed properly self-employed in the UK so first of all the most important bit of all is that you need to do some work and get paid for it if you haven't been paid for any work you don't have a business and effectively you're not self-employed yet you need to do some work prove that it's a business that can make some money and then go on to your next steps that said if you are going into business with the intention of making money or making a profit you do need a register to be self-employed in the UK you might not have to pay any tax but you still need to tell the government all about the fact that you've got a business and you're trying to make money so this takes me on to step 2 you need to register to be self-employed and you need to register for self assessment I'm talking purely from the perspective of a sole trader I'm not talking about limited companies or partnerships or LLP s or anything like that I'm purely talking about sole traders in the UK so the purpose of registering with the government to be self-employed is that you need to register to pay tax and national insurance you need to register for a thing called self assessment self assessment by the very name self assessment you are going to assess yourself to decide how much tax you need to pay and you're gonna tell the government sounds great doesn't it you just make up your figures submit it to the government everything will be hokey cokey but know you've to submit correct figures because if you don't that's a thing called tax evasion and that's not a route that you want to go down although I might give you some tips on tax avoidance which is perfectly legal it's a normal thing to not pay more tax and you should pay I'm not talking about your big conglomerates who have very complicated tax structures to avoid paying any tax that is not what this channel is about because again generally that's more corporation tax what we're talking about here is personal tax or income tax it's assessed through a thing called self assessment in the UK and you do a yearly tax return that tax return works out how much tax you need to pay and how much national insurance you need to pay so step one is to actually make some money step two is to register with the government to be self-employed step three is to keep good records you need to keep good accounting records of all of your sales and all of your purchases because remember you're going to pay tax on profit if you're not sure what that's about I've already done a video explaining the difference between profit and turnover and all that sort of thing again I'll pop a link in the description below if you're not sure if you don't understand what turnover is you don't understand what profit is you don't understand what net profit is watch that video because it will explain it you need to understand that as a business owner there are three things that's all you need to do there's two other optional things many people will tell you that their compulsory and mandatory they are not the first optional thing is to have a business bank account now I would generally advise that you do have a business bank account but it's not mandatory as long as you're keeping good accounting records and you're keeping your personal finances separate in terms of your record-keeping the Inland Revenue don't care where you keep your money your bank might so that is something you need to check with your bank because many personal bank accounts don't allow you to use the account for business purposes that said I've done that for years and years and years and the bank don't care I think unless you're putting an enormous amount of transaction through they probably really don't care that much but a lot of business accounts you're gonna pay per transaction on that account and if they notice that there's a lot of transactions going through your account for very small amounts of money they're gonna want a piece of that pie and they're gonna want to get you onto a business account so they can take a chunk of every little sale that go through or whatever and the fifth thing which is optional but again highly recommended is insurance now this is gonna vary from business to business of course there are some insurances that are either absolutely mandatory or you would be stupid not to put them in place things like public liability insurance to make sure that you're covered if you caused an accident or someone comes into your business premises and trips up and they decide they're going to sue you or whatever you need to have insurance in place to cover you for that sort of thing contents insurance insurance to cover your equipment that you might take out to customer jobs you know all these things are more common sense there may be regulatory things for example if you're doing work for a certain body of companies they may insist you that you have certain insurances in place my point is is that generally speaking insurance isn't a mandatory thing it's just a very good idea so I'm not going to go into business bank accounts and insurances today I might do that at a separate date so if you want more information about that pop it in the comments and if there's enough interest I might do a video about that sort of thing and obviously don't forget to hit that subscribe button wherever it is because then you can see other business tip videos that I'll put out as and when I get them done so your first three really important things for setting up a business do work and get paid for it establish that it's actually a viable business register with the government to tell them that you need to pay tax and and insurance on self-assessment and keep good records now I can't tell you how to run your particular business so I can't help that much with 0.1 but I will give you a few tips along the way so do hit that subscribe button the record-keeping side of things I've already done a couple of videos on and there will be some more videos coming up as well so that side you should only be kind of covered on as well so I'm going to help you today for the second point in the list which is the actual registration process and it's quite a straightforward process so I'm going to take you over to the computer now and I'm going to take you through the whole application to be self employed on the government website now before we start with anything if it's your first year in business I can't stress it enough speak to an accountant they will point you in the right direction for a lot of things that I'll not be aware of and you will not be aware of and the likelihood is they will save you more money in your first year of business then it would cost you by paying for their services anyway because they know a lot of the ins and outs of tax and national insurance and all that side of things it's their job to keep up to date without sort of information and trust me there's a huge amount of information out there that you're gonna have to take in as a self-employed person and you're gonna have to understand it ultimately the buck stops at you not your accountant if you make a mistake on a tax return even if your accountant makes a mistake on a tax return guess who Inland Revenue are gonna be chasing and it in your accountant so even if it is just for the first year of business you get an accountant involved you try and work out all the figures for yourself if your predicted figures differ from what the accountants come up with I'll see accountant why you need to have an understanding of every single aspect of your business accounts from day one that is such a key thing don't just Bob it all off to the accountant assuming they're going to do everything and it their problem but you as a business owner you've got to have a good understanding of how the Tax and Accounting side of things works so before we start with anything there's a few key bits of information that you're gonna have to have to hand you're gonna need a business name and description you're gonna have to have the date that your business started trading you're gonna have to have an email address you're gonna need your National Insurance number and you're gonna need a few personal details of yourself such as date of birth address and all that sort of thing purely talking about a self-employed sole trader so you'll see that I'm on the gov you K website here it's really important you familiarize yourself with this website because there's a huge amount of really well-written and useful information on here if anything the thing that let sit down is that there tends to be too much information about stuff that's not relevant so it's very common to go into a particular section of the site and find information that bears no relevance to the original thing that you might get clicked on that aside let's get going so we're at Google you K click on money and tax scroll down go down a self-assessment and scroll down on here and we're going to do self-assessment tax returns now you can take a shortcut to all of this just by going to gov dot uk' slash working for yourself and I think that'll take you to this page but that's showing you how to get there from the very beginning have a read of all the information on this page because it's very useful tells you what the deadlines are generally what you have to do in terms of filling in a tax return but the section that we're going to go into on here is self-employed and small trader now this is assuming you've never been self-employed before you don't have a utr and you don't know what one is so you don't have a unique taxpayer reference and you're starting from scratch this is also gonna set you up with a government gateway account which you need if you've already got a government gateway account use that so scroll down on here and we're looking at this section here if you haven't sent in a tax return before so have a read of what it says here don't just click through read everything you've got to understand this it's really important for running your business if you run into problems later on and it's not asking for this and I don't know how to get it it's probably because you've skipped past it and you haven't read it so it says here if you haven't sent in a tax return before register online and you'll get a letter with your 10 digit unique taxpayer reference you can a need your you TR you're gonna keep that number probably for the rest of your life it's almost as important as your National Insurance number and you're going to refer to that every time you pay your self-assessment tax for your business and you're going to be enrolled for the self-assessment online service at the same time you'll also get a letter within 10 working days with an activation code you'll need that code the first time you log in online to your account so click register online so I'm gonna fill this in with fictitious details for now just to show you how this works I'm not going to complete the whole process obviously because I don't want to set up a false tax account but I'm just going to take you through so we're gonna pretend my name is Jill logs and we're going to pretend that my email address is Joe doc logs and then we're going to put password in and then we'll click continue make sure you make a note of that password because you're gonna need it you're then gonna get your user ID for the government gateway so make a note of the user ID that you get you should get an email with that in anyway continue we're up to the actual registration process for self-employment now this is where they start to put a lot of stuff on a screen that's completely irrelevant so we've got information here for corporation tax P a ye for employers and VAT but this isn't what we're doing we've gone on to this specifically for self-assessment so why it's giving you all that information is beyond me self assessment including class to national insurance contributions so what are we doing please select an option below to tell HMRC what you want to do next I want to tell HMRC that I'm in business and need to register for a new tax in other words for self assessment so we're going to do that next lots more information that is nothing to do with the thing that we originally clicked on in fact I would say 75% of the screen there is nothing to do with self assessment so this is a bit that we are concerned about self assessment and pa y8 next more information that isn't relevant ok so next what they're talking about there is more for if you've got two different businesses registered for VAT and stuff like that let's just go next at the moment so again what we setting up for while we're setting up for self-assessment that's the link that we follow it in the first place but it's still asking us if we want to set up for corporation tax and PA ye for employers and VAT but it's not self assessment that we're doing next it's important that the HMRC know what type of business you are as I say we're not doing a partnership we're doing self-employed which is up next okay when did you start working for yourself I'm just going to put in a date of first of July 2017 which is a day that already helps to be there and we'll click Next so generally you can a base that on when did you first start charging people for the work that you were doing next and all that next okay so we've got these six sections we now need to complete if you just keep clicking next it'll take you through all those sections so we'll just do them are you a UK resident yes we're gonna assume no are you a share fisherman we're assuming not are you a land or property business we're assuming not are you a light underwriter no are you a director again if you are a director of a limited company you're gonna have to put that in there we're assuming that isn't the case or you're a minister of religion no are you an individual a tour examiner no it's your business and investment assuming not do you intend to work in the construction industry no this is an important one if you are going to be a contractor a subcontractor in the construction industry then you get tax in a different way and you would put yes in that and there's a thing known as says which is a construction industry scheme and it's a slightly different way for tax to work if you work as a subcontractor if you're not going to be a subcontractor in other words you're just a plumber or a joiner or an electrician who's just going to go out to customers and do work directly for the end customer then just leave that as no because you're not a subcontractor in that situation if you've previously registered for self-assessment and year utr yes so if you've already got a utr put it in but we're assuming you don't have one so you leave that blank are you working for one person or firm only the assumption here is no you're going to work for lots of different people while you're self-employed you're gonna in other words you're going to be providing your services to lots of different either individuals or company if you are saying that you're working only for one person you get into that murky gray area of the gig economy that is in the news at the moment just look up uber we're assuming that's not the case you're going to be providing services to lots of different people if that isn't the case I would strongly recommend that you go straight to an accountant you can also go into this employment status indicator and it can take you through a checklist to work out what this should be but I'm assuming you are not only going to be doing work for one person next so you obviously put your business postcode in then do find a dress I'm going to do postcode unknown at this particular time just sort and plow on [Music] okay enter the contact details for the person that HMRC can contact about this registration so we're going to keep it as Jill don't long standing drums and provide a telephone number as well okay so just double check all the information that you've put in this correct and do next when did you start working for yourself we've already put that in okay so put in your business name and I'm just gonna call it Joe Bloggs industries and what sort of work is it I'm going to say it is a design firm design you can put as much information as you want in there but it doesn't need to be particularly detailed at this stage the business name there are various rules and regulations about what you can call your business because we're not setting up as a limited company you can't have things like limited or Ltd or PLC or things like that as part of the name the names not allowed to be offensive and it's not allowed to be the same as an existing trademark so just bear in mind those things when you put your business name in we'll go next you can't change it later down the line so I wouldn't worry too much it's a business address the same as this address we'll just say yes next business phone number did I not already do that remember and that's basically it you would click next and that would be it done and dusted you've registered with HMRC for self-employment and self-assessment you've done your bit so you're now waiting on three different things from HMRC once this is all done and dusted you are waiting on your utr your unique tax payer reference you're also waiting on your activation code for the government gateway logon and ultimately you're waiting for a letter telling you you need to complete your first tax return now that letter can simply mistake months and months and months to arrive if the business was set up on first of July 2017 I wouldn't be completing my first tax return until the 31st of January 2019 and that is basically it so just before I finish off a couple of other bits of information that might be useful for you you need to register by the 5th of October of your businesses second trading year in other words you need to tell the tax office that you're self-employed at the very latest by 5th of October of the second trading year of your business but if you've only just started doing self-employment work don't panic you've got loads of time to sort this sort of stuff out but I do suggest you get an accountant involved to help you through it at least for the first year so you've got a good understanding of how everything works and also to make sure that your figures tally up with the accountants figures remember you're only gonna be paying tax on your profits not on your turnover that's the normal way tax works you're gonna have to work out your expenses and deduct them from your turnover I've covered that in a separate video have a quick watch of it it is a bit out of date I will be doing a new one at some point so don't forget to subscribe for the moment you're gonna be paying income tax and class to national insurance and potentially class for national insurance but the thresholds for all of those sort of things for example at the moment if your profits are less than six thousand and twenty five pounds a year you don't have to pay any class to national insurance also class two and I might be getting abolished at some point as well so just bear that in mind if you're watching this video later down the line in terms of class for national insurance you only pay that at the moment on profits over eight thousand one hundred and sixty four pounds and you pay that nine percent now again there's exceptions and there's rules around that where these sort of things change you need to drill into that in a bit more detail but that's just a rough kind of estimate for you of how much much insurance you can be expected to pay but again it's only on your profits not on your turnover if you haven't made any profit don't worry but you do still need to register for self-employment and complete a tax return I was also going to very briefly mention as well you might want to pay national shirts on a voluntary basis why is that I hear you ask well because your nations's qualifies you for your pension when you retire and if you don't have enough years of national insurance being paid then you might not get your full state pension you need thirty qualifying n/i years for a full state pension so that's why you might want to voluntarily pay your class to Nationals which is only one hundred and forty eight pound per year and that then gives you a qualifying year for your pension you can go on gov dot uk' slash check state pension if you want to check how many qualifying years you've got and that's basically it you keep your records of sales and expenses and you fill in a tax return every year you pay your tax and national insurance on your profits and that's it I'm not going to talk about v80 or value-added tax at all but you will have to register for that if your turnover is over 85,000 pounds a year in this current tax year which is a 1718 tuxie obviously that figure might change from year to year so bear that in mind if your turnover is well under that you don't have to register for v80 you can if you want but you don't have to so that's it Donna dusted you've done your bit go and make lots of money wait for HMRC to get back in touch with you I would certainly recommend the self-employment journey to anyone it is a hard hard job at times but it's also one of the most rewarding things that you can do in your life it's certainly a life-changing thing to do so if you're becoming self-employed or you're just thinking about setting up a business in 2018 welcome aboard it's an awesome journey you will not regret it but there's a lot of work that you're gonna have to do and hopefully I can help you along the way a little bit on this channel so I hope you've enjoyed this give it a quick thumbs up share it around with anyone that you know who runs a business or is thinking of becoming self-employed I'm gonna be trying to get as many more videos on self-employment tips and small business advice out to you as I possibly can in the meantime hit that subscribe button give it a quick thumbs up and I shall see you next time bye bye

Channel: Small Business Toolbox

Views: 101,302

Rating: 4.9523811 out of 5

Keywords: how to be self employed, how to become self employed, uk, 2018, how to be self employed uk, uk self employed, how to set up a business uk, uk small business tips, how to start a business uk, hmrc self employed, how to register self employed uk, how do I become self employed, I want to work for myself uk, uk self employment, how to start a business in the uk, how do i become self employed uk, how do I set up a business, how do i set up a business uk

Id: hYdWyKIuwQM

Length: 25min 0sec (1500 seconds)

Published: Sun Sep 30 2018