How To Register As A Freelancer

The number of people choosing the flexible freelance lifestyle has grown massively over the last decade, in the U.k. there are at present over four.8 million people registered as self-employed.

With and then many freelancers to keep track of, HMRC have fix strict rules on how you should annals as a freelancer, and how to pay tax if you are freelance.

Every bit a freelance recruitment agency, we often get asked how to annals every bit a freelancer with HMRC so nosotros are going to talk y'all through how to exercise this in five stress-free steps, and then yous can focus on the creative stuff.

Step 1: Decide on how yous are going to freelance

This is one of the most important decisions you will make, and you have 4 options to pick from:

Work as a Sole Trader: this means y'all are cocky-employed and are operating as an individual. Your income is yours to go on later on tax, and you are responsible for the losses and the costs that your business organisation makes.

Register your own Limited Visitor: this means you are operating through a business concern which is legally divide to you. You would exist both the owner and an employee of the company. Your express company's finances including losses will be separate from your personal finances.

Gear up a Express Liability Partnership: this is when y'all work in partnership with at to the lowest degree 1 other person (or company) and share the responsibility for the business's expenses and losses. You share the profits after you've each paid revenue enhancement on your share.

Work nether an Umbrella Visitor: An Umbrella visitor is an employer of contractors, providing them with the benefits of permanent employment along with the benefits and flexibility of working as a freelancer. Umbrella companies volition invoice your customer on your behalf, so pay you as PAYE with taxation and national insurance deductions. Yous would nonetheless be able to claim tax back on costs such as travel and expenses. Umbrella companies normally charge a fee for providing this service, which is often a fixed weekly or monthly corporeality.

At that place are pros and cons to each of these options, which you lot need to weigh against your priorities. Your option will have implications on your tax arrangements, income, and the corporeality of admin; so determine advisedly!

Stride 2: Setting yourself up properly

To become a sole trader, you simply demand to register as self-employed (see below)
To class a Limited Company run across here.
To fix every bit a Limited Liability Partnership, follow this link.
To sign up to an Umbrella company, start we suggest you compare service offerings to find i that suits you lot best – brand certain to check out online reviews to ensure you are selecting a trustworthy company! The adjacent step would exist to contact your called Umbrella company, they will then send yous paperwork to consummate to be onboarded as one of their contractors.

Step 3: Register as self-employed with HMRC

You simply need to register equally Self-Employed if you are going to piece of work as a Sole Trader or in a Express Liability Partnership – for those intending to piece of work via a Express Company or Umbrella company you can skip this section, your taxation payments are unlike.

Technically you don't need register until Oct in your second yr of trading, merely we recommend yous annals soon after you kickoff freelancing. Y'all will be thankful for getting this out the fashion early – it is easier to go along track of your tax as you go along rather than trying to dorsum date everything 2 years later!

To annals as self-employed, visit the regime website here.

Paying taxation as someone who is self-employed is very different to what y'all would be used to as an employee. Rather than this coming out of your pay cheque automatically each month / week, you need to have responsibility for submitting an annual tax return. To do this you will demand to keep a record of everything yous earn (so file those invoices somewhere safe!) as well as keeping runway of business organization expenses as you can first the amount of tax y'all pay against these after.

Which? has adult a useful tax calculator that is officially recognised by HMRC, it can you lot predict how much tax you need to put bated.

Make sure to pay attention to HMRC's deadlines, as you may exist fined if you register or file returns late:

Deadline for submitting paper tax returns: 31^st October
Borderline for submitting online tax returns: 31^st Jan
Deadline for payments on tax bill: 31^st January and 31^st July
Deadline for registering self-assessment: 5^thursday October

Stride four: Keep track of your accounts

If you volition exist computing your ain taxes, nosotros highly recommend you get yourself some accounting software that will help you manage your invoices, tax returns and business concern expenses in one like shooting fish in a barrel place. It is a flake like having a virtual accountant and will assistance you stay organised and keep on top of everything. There is nothing worst than having to scramble around to find old receipts when the HMRC deadline is looming. Software such every bit Quickbooks or Xero are recommended for this, and tin can help you go along on top of everything.

Pace v: Be enlightened of legislation

HMRC sets the rules on how companies work with freelancers to ensure companies and freelancers are not underpaying tax. A big role of this is your customer'south responsibility, but every bit a freelancer you should also be aware of the rules and make sure you are following them likewise.

Information technology is particularly of import you are aware of the IR35 Off-Payroll legislation which will be enforced from April 2021. We recommend y'all check out the regime site for data on IR35 and useful tools to assist you fix for the changes next twelvemonth!

We promise this article has been helpful. If you have whatever advice of your own for new freelancers, we would love to hear it! Go far touch: mary@yellowcat.london

Mary Broome, Caput of Recruitment, Yellowish Cat