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Freelancers are easier said than done and come with a lot of responsibility. You have to take care of your employees, manage your money, pay taxes and file tax returns.
Individuals must pay income tax regardless of their source of income, whether they are self-employed or not. However, self-employed people often do not file tax returns due to the registration process.
What steps do I need to take to file for self-employment tax in the UK?
1. Complete the self-assessment form provided by HMRC.
• You must tell the tax office your employment status by registering for self-assessment on the HMRC website.
• Remember the filing deadline: You have 5 October after the end of the tax year to file or face a penalty. Remember that the fiscal year begins on April 6. If you start a solo business in February, you have eight months to register.
• Your UTR letter should arrive within ten days with your 10-digit Unique Taxpayer Identification Number (UTR). When it comes to paying taxes, you will need it.
• Your online account – HMRC will create your online tax account so you can submit your tax return on time.
2. Register for additional taxes.
• You can access your VAT. Consumers now pay additional tax on most goods and services in England, which is set at 20%.
• You must register with HMRC if your taxable income exceeds £85,000 in the tax year. If you earn less, it’s completely up to you.
• You will receive a certificate confirming your TIN and important information to file your first tax return and payment.
• It takes up to one month for the certificate to be delivered, during which time you may not be able to pay or show the tax on the invoice. You still have to pay taxes.
• Inform your customers that you will charge higher rates during this period and re-invoice after VAT.
Tax registration gives you a better reputation and professionalism, as well as more privacy about your income.
Filing a tax return
The tax return is divided into two parts. The basic component includes employment income, pensions, charitable contributions and benefits. An additional site for people with income from self-employment, real estate, investment income, company directors, and working abroad.
You can file your return online or on paper, but there are different limits. The government also plans to declassify paper revenue as part of the ‘Tax Digitization’ initiative, which will begin in April 2022.
How to fill out a tax return online?
Here’s what it means and a step-by-step guide on how to do it if you’re applying online:
• After logging in with your Government Gateway username, go to the ‘self assessment’ page. You only need to enter your UTR number when you first register for online services.
• Make sure your personal information is up-to-date, such as your place of residence and marital status, as well as your date of birth, because this may affect your records.
• Follow HMRC guidance: the system responds to the information you provide, so items that do not need to be removed. You cannot progress until you have answered HMRC’s questions.
• Return – based on the answer you give you will be given a place to complete. When you click “Next” your progress is saved, so don’t worry if you have to find a missing paper when you exit.
• Enter your expenses – there are some strict requirements: they must be taxable business expenses. See our freelance guide for more information on what you can and cannot claim as an expense.
• If employees receive any employment benefits during the year, such as company car or health insurance, they should be on P60, P11D. No need to count; fill in the number directly from this sheet.
• Return to HMRC; You will receive a confirmation once you have done so. Now, make sure you pay your taxes on time or set up a payment plan before January 31st. If you can’t remember how much you owe, go to that page