Frequently Asked HMRC Questions on being self employed in the UK

To Note

The information here:

• Is specific to the United Kingdom
• Not exhaustive and may not be up to date - please check the date of the latest commits!
• Assumes you have decided to register as self employed/sole trader and not as a company
• Assumes you are dealing with the 2015-16 financial year (April 2015 - April 2016) unless otherwise stated

What?

This is an incomplete guide to the things we think might be useful for you to know if you're working as a freelancer in the UK. It's mainly a record of the questions we've been asked on this topic.

Why?

Her Majesty's Revenue & Customs (HMRC) doesn't always make for the most user-friendly experience.

Instructions are often complicated or conflicting, especially as they have to cater to a large number of different situations.

Over the last few months @nelsonci and @iteles have fielded many questions along the lines of 'what do I need to do to be registered as self employed?' and 'how do I know how much I need to set aside to pay tax?'.

So this repo collects the answers to those FAQs so people can refer back to the answers when it comes time to fill in self assessments.

What do I need to tell the HMRC and when?

1. Register a self-employed with the HMRC: https://www.gov.uk/new-business-register-for-tax

• For 2015/16 financial year, you must do this by 1st October 2016
• This should get you both an online account with the HMRC ('Government Gateway account') and a Unique Taxpayer Reference (UTR) - you'll need this to register for self-assessment
• They will send you and activation code and a UTR in the post
• Using your online account, register for self-assessment online

For the 2015/16 financial year, you must:

• Fill in your self-assessment by 31st October 2016 (paper copy) or 31st January 2017 (online)

What do I need to save up to pay?

There are 2 things you will need to pay annually:

• Income tax
• National insurance

These are both calculated once you fill in your self assessment.

For the 2015/16 financial year, you must:

• Pay all tax and National Insurance (NI) by 31st January 2017
  • This can be done online as soon as you've filled your self-assessment

Income tax

• Paid on profits (revenue minus allowable expenses)
• You have an income tax free allowance of £10,600 for the 2015/16 financial year
• HMRC Income Tax Rates page

National Insurance (NI)

• Paid on profits (revenue minus allowable expenses)
• HMRC National Insurance Rates page

Asides

Allowable Expenses

• Here is the HMRC's guide to allowable expenses
• If you work from home for any part of the week, you can claim a portion of your some living costs as business expenses (electricity, rent and council tax for example)
  • Here is a good guide from Freeagent on how to calculate your working from home expenses on how to work
• You can claim telephone calls as business expenses but if you also use your phone for personal calls, you can only count the business calls as business expenses

VAT

You do not need to register for VAT until you reach £82,000 of revenue in a given financial year.

Helpful tips

• Open a separate bank account just for your business income and expenses - this will make things a lot easier to track (thanks @jbarget!)
• Open a separate savings account to save the money you will need to pay in income tax and national insurance throughout the year (thanks @thegsi!)

Notes

• If you've also been in paid employment in this financial year, there is a section in your self-assessment form where you will need to include this information for it to provide you with the correct calculations