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Registering as a Freelancer

Freelance business woman

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With the economic downturn more people have decided to start up their own business. One of the simplest forms is to become a freelancer, which involves no registration costs and minimal administration. If you’re considering becoming a freelancer, what areas do you need to be aware of?

Before you start your business, there are some occupations where you’ll need a licence or permit to operate. This includes childminders, taxi drivers and street traders. You should also look into whether you’ll be liable for business rates. This might affect you if you work from home and the area you use is only required for the business. A home business might need planning permission if you intend to make alterations to the house or the nature of the work will disrupt the neighbours.

Man working freelance

What do you need to register for?

Within three months of starting work you need to register with HMRC as self-employed. Otherwise you could face up to a £100 fine, as well as paying interest on any tax you owe. It‘s quick to register online and you’ll need to supply details of the nature of the business, when you started working and if this is a partnership.

As a freelancer you’ll submit your own annual tax returns through Self Assessment, by providing HMRC with details of how much income you earned and any tax deductible expenses you incurred. Before you can submit your return you need to register for Self Assessment. This should be done well in advance of the deadlines, as HMRC will need to send you your Unique Taxpayer Reference (UTR) before you can submit it. The details of how to submit your tax return should be sent out in April and there are different deadlines based on whether you choose to do so by post or online. You’ll need to pay any tax you owe by January 31st following the end of the tax year.

You will also need to register to make Class 2 and Class 4 National Insurance (NI) contributions. Class 2 contributions cost £2.70 per week and can be paid either monthly or quarterly. Class 4 are paid as a percentage of your annual taxable profits and will be due with your income tax.

If your business is expected to turnover in excess of £79,000 a year, you’ll need to register for VAT. The process for this will vary depending on if you’re registering for basic VAT or as part of a partnership.

Man doing his business accounts

Keeping records

Once you start working as a freelancer, it’s important to keep the right financial records. These should be maintained for at least three years from the end of the tax year, as HMRC are entitled to ask for them. It’s best to implement an organised and straightforward system from the beginning to prevent you from getting into bad habits. The records should include annual accounts, bank statements, cash logs, order and delivery details and business correspondence. If you’re registered for VAT, the required records are more extensive.

When you begin life as a freelancer, the process of starting up and maintaining financial records can appear daunting. As long as you work through the process methodically and are aware of all the appropriate deadlines, it shouldn’t impact too much on your daily workload.







About Catherine Stern

About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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