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When To Register as Self-Employed

It is your responsibility to notify HMRC that you are self employed so you can declare your income and pay your tax and national insurance, and there are some rules and deadlines you need to know about when it comes to registration. Here’s what you need to know.

[This is part of the Understanding Self Employment Series]

When Should You Register as Self-Employed?

If you have an active business, whether loss making or not, you need to let HMRC know once your income (not profit) goes over £1,000. Below £1,000 you can choose to take advantage of the HMRC trading allowance, but this isn’t always tax efficient so you should check if it is right for you first. In particular, you won’t be able to claim tax losses which can reduce your tax bills in the future, if you plan to work for yourself on an ongoing basis.

The deadline for registering as self-employed is the 5th October following the end of the tax year you started working for yourself. So if you started working for yourself on 1 December 2020 you’ll need to register with HMRC by the 5th October 2021.

Even if you have plenty of time to register, it is advisable to do it as soon as possible because there are penalties if you miss the deadline.

Can You Run a Business Without Registering It?

Every business or sole trader needs to be registered for tax, whether they are making a profit or not. That’s because HMRC wants to track what is happening with everyone’s earnings by using the process of self assessment. You can start to run a business without registering it until turnover (not profit) exceeds £1,000, after that, you’ll need to register as self-employed.

If you are planning to set up a business and operate through a Limited Company, you’ll need to register your business at Companies House before you can use the name and the letters LTD or Limited at the end of the name, as well as being able to open a business bank account.

Not sure what legal structure is right for you? Read this guide: Sole Trader or Limited Company? Which Business Structure is Right for You?

Key Takeaways

  • The deadline for registering as self-employed is the 5th October following the end of the tax year you started working for yourself;
  • There are penalties starting at £100 if you miss this registration deadline;
  • You can earn an income (not profit) of up to £1,000 without letting HMRC know about it;
  • The rules are different if you operate through a LTD company meaning you’ll need to form your LTD before you start trading so you can use your full Company name.

[This is part of the Understanding Self Employment Series]

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co - the UK small business finance blog for the self-employed community. Here she shares simple, straight-forward guides to make self-employment topics like taxes, bookkeeping and banking easy to understand.