Being self-employed is slightly different to working for an employer but are you aware of your legal requirements after registering with HMRC and receiving your UTR number?
This self employed guide will discuss the requirements expected from you as a self employed sole trader. We will also touch on the pitfalls, and what needs to be done on an annual basis.
Self Employed, Deadlines & Tax Years
There are important dates that a self employed individual should be aware of, the first being the Tax year.
The Tax year begins on 6th April one year and ends on 5th April the next year. For example, this Tax year (2020/2021) will run from 6th April 2020 and will finish 5th April 2021.
HMRC will require a Tax return from yourself every year which will declare your income and expenditure. For most people, they will use an accountant like ourselves to minimise your Tax liabilities, and to ensure your Tax return is filed correctly.
The deadline for filing your Tax return is the 31st January following the end of the Tax year. In the above 2020/21 Tax year example, your Tax return will due to be filed with HMRC by 31st January 2022.
This essentially means that you have the best part of nine months to complete and submit your Tax return to HMRC.
If you earn over £1,000 during a tax year it is a legal requirement to file a self-assessment tax return with HMRC.
If you earn less than this, then no Tax return will be needed, but you will have to call HMRC to let them know this, otherwise you will receive a late filing penalty.
Once your return is complete and submitted with HMRC, the tax owed will be payable by 31st January the following tax year (the same time as your Tax return is due).
Failure to submit and pay your tax by this date will result in substantial fines that increase daily, so it is a good idea to get ahead with your accounts before the deadline hits.
Keeping Business Separate from Personal
In order to keep a clear distinction between business and personal matters it would be beneficial to open a separate bank account for business transactions.
You can open a business bank account with any of the major high-street banks. We have found https://www.tide.co/ (Tide banking) to be fairly easy to setup for most individuals.
Some challenger banks are also offering business bank accounts and are perfect if a lot of your banking needs can be done online.
They are also a good option if your credit history is not as perfect as you’d like it to be and can be relatively quick and easy to set up from the comfort of your own home.