How to Set Up and Register As Selfemployed in the United Kingdom
If you want to keep things nice and simple when setting up a business, then the best way is to do this is to register as a sole trader. Yes, of course, you have to inform the tax people (HMRC in the United Kingdom, IRS in the United States) but the paperwork is minimal, there are no fees to pay and a lot of it can be done online.
You do have to keep records and accurate accounting. Almost anyone can set up as a sole trader but there are some types of work that require licenses and permissions. These include restaurants, any job that involves children and vulnerable people, street traders and taxi drivers. If you are planning to work from home, then you will have to pay business rates for the part of your home that you use to run your business. There may be an inspection to make sure that your building complies with regulations especially when it comes to the health and safety of any potential visitors. Another thing you need to remember is that you may also need to get planning permission so make sure you speak to your local council or else your hard work may be in vain.
Choosing a business name
You can choose to use your own name or unleash your creative prowess and think of something totally original. If you want to use both you can by using the 'trading as' alias i.e. A.N.Other trading as XYZ Plumbing. You have to make sure that the name that you choose is not too similar to a company that already exists especially if the business is close by or is a huge conglomerate! You also have to ensure that it does not contain any misleading, racist or otherwise offensive words.
How you can register your status
When you become self-employed, you must register for Income Tax and National Insurance. You cannot register in advance. If you leave it too long, you will be fined. There are three ways to do this:
• Online - click on this link to find out more http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.htm
• By phone - By calling 0845 915 4515
• Or by post - you can download the form and post it to HMRC
Remember to have your national insurance number and proof of your identity to hand or else you will not get very far! Other information you will need includes contact details, date of birth, business name and address, what your business does and Unique Tax Reference(UTR).
So what is the UTR and where can I find it?
If you have completed a tax return, then you will find it on any Self Assessment documentation. It is usually ten digits long.
Ok then what about my National Insurance Number?
If you do not have one, then click here to find out how to get one. If you have one then it can be found on payslips, any HMRC correspondence, P45s and P60s.
So tell me a little more about registering online...
Ok. There is really nothing to it. You have to remember that it cannot be used if you are a partner in a limited liability partnership (LLP). If you want to know about what that is, click on this link. Your information that you submit via the website is secure but they will reply by email which is not so secure so any confidential stuff will not be contained in it. If they need to send this type of information to you, they will either call or write to you.
The two links that you need to know are http://www.businesslink.gov.uk/bdotg/action/detail?type=PIP&itemId=1083815344&r.s=e&r.l1=1073858805&r.lc=en&r.l3=1073875654&r.l2=1073859131&r.i=1083844795&r.t=RESOURCES and http://www.businesslink.gov.uk/bdotg/action/detail?type=PIP&itemId=1083815344&r.s=e&r.l1=1073858805&r.lc=en&r.l3=1073875654&r.l2=1073859131&r.i=1083844795&r.t=RESOURCES. Yes they are long but they will take you straight there.
What other ways could I register again?
By calling the Newly Self Employed Helpline on 0845 915 4515. Their office opens at 08.00 and close 20.00 Monday to Friday and 08.00 to 16.00 Saturday and Sunday. You will need to have all the information to hand
You can also register by post by completing the CWF1 form or you can call the helpline and get them to send it to you.
What is all this about National Insurance? What has it to do with me and my business?
National Insurance contributions (NICs) are paid by employees as well as self-employed towards their pension. When you register yourself as self-employed, you will be liable to pay Class 2 NICs. These are paid weekly and are very low (£2.40 for the 2009-10 tax year). The best and easiest way to pay them is by direct debit. As well as being easy to set up, they give you peace of mind if you are the forgetful type. and it helps you to budget. If you do not want to pay weekly, you will be sent a quarterly bill. If you expect your earnings to be very low, then you can be exempted from paying these.
So there you have it a rough guide of setting up as self-employed in the United Kingdom. Although there is a lot of information, it is relatively easy to do so and can save you money and hassle in the future. This is the start of your journey, make sure you get it right. As they say here in the United Kingdom, "take care of the pennies and the pounds will take care of themselves"
Take care and God Bless readers...
© Ngozi Nwabineli - November 2009