SELF EMPLOYED FAQ

SELF-EMPLOYED FAQ

1. What is self-employed?
Self-Employment is a type of business in the UK where you work for yourself as a sole trader or a self-employed contractor. It is the simplest and quickest way to start a business. The company has no legal personality and it is the owner who is responsible for the company’s debts, which means the owner’s personal assets may be at risk.
2. When should I register as self-employed?
You should register your business with HM Revenue & Customs if you work on a self-employed basis.  To do so, you can ask our accounting office at Gold Accounting for help. Your business should be registered if:
– you issue invoices
– you offer services to a fair number of clients
– you are responsible for the losses and profits of your business
– you are able to hire staff
– you have control over what, how, where and when is done as a part of services of your company
3. How do I know I need to complete a tax return?
You need to complete a tax return if you meet one of the following conditions:
– you run a business
– you are self-employed
– you are registered in the CIS system
– you are the Director of a company
– you are a partner in a trading company
– you receive an income from real estate
– you have an income, from which tax was not yet deducted
– you reach a very high income
– you receive income from abroad
4. What documents do I need to complete my tax return?
You will need business receipts, e.g., invoices, bills for expenses related to the business. You will need receipts for the expenses you wish to deduct from your income.
5. When can I apply for a tax refund?
The tax year in the UK starts on April 6 and runs through to the following April 5. You can claim a tax refund at the end of the tax year.
6. How do I work out my tax correctly?
You need to keep a good record of money coming in and going out of your business. The basic records should include:
– all sales and takings
– all purchases and expenses
You should file any paperwork relating to your business, e.g., invoices, bank statements, cashbooks, receipts for purchases, P60 if you are also employed. They can be in electronic form.
7. How and when do I complete my tax return?
The tax year begins April 6 and ends on the following year April 5. Each year in April, HMRC will send you a letter reminding to complete your tax return (online or paper) for the tax year that has just ended.
Tax return deadlines are:
– 31 October for paper returns
– 31 January for online tax return
8. How much and when do I pay tax?
Based on what you report, HMRC will calculate what you owe. You should pay the balance by January 31.
9. Can I claim the use of my home as a business expense?
Yes, you can. You need to calculate how many hours a week you are using a room in your home for business purposes and calculate the cost of the room per hour. You can claim expenses for heating, electricity, water, and council tax.
10. What are the advantages of going self-employed?
– You are your own boss
– You work for many different companies, which will help you build skills and experience
– You have the freedom to work when and for how long you like
– You can negotiate the payment terms
– You can work for many clients at the same time, which can increase your earnings.
11. What are the disadvantages of going self-employed?
– You need to do everything yourself and you are responsible for running of your business
– Large income is rare in the early days; you may need a second job to get a guaranteed income, given that your employer is fine with it.
– You need to offer a product or service, for which there is demand.
– You may need to work from other premises if you do not have enough space or facilities at home, which means you will have to pay a rent