When you become self-employed there are a number of things you need to do to get yourself trading as quickly as possible so that you can get paid and more importantly save yourself some money when you complete your tax return! It all sounds a bit scary but we have tried to help you out with a step by step guide and some useful links to the people you need to speak to.
Business Essentials
Step by Step Guide
STEP 1
Register Self-Employed
Every single person who works for Pirate Crew MUST be registered with HMRC and must have a Unique Tax Reference number. Even if you are a student you must be registered because you are responsible for your own Tax and National Insurance contributions. When working for Pirate Crew you are employed as a self-employed worker, we are not your employer.
STEP 2
Be Organised
It may seem like a big task to keep on top of your accounts and keep busy at the same time, but if you do it straight after each job it is really easy.
- Make sure you invoice each job straight after it (click on How To Write an Invoice for more info).
- Keep all your receipts together for that financial year so that when you come to complete your Self-Assessment Tax Return you know what you are able to claim back from the tax man! Always ask for a VAT receipt when you spend money on petrol or travel, any tools, computers or anything else you use for your work.
- Keep your monthly bills together (electricity, gas) as you can claim an element of this back too.
- Keep all your work in a diary (paper or online), so that when you come to check back you know when you worked and who for.
- Check your bank on a regular basis so that you know when you have or haven’t been paid. You would be amazed how many people forget to check they have been paid!!
- Some people find it useful to put an amount of money to one side when they have been paid to help pay the tax bill at the end of the year – so you don’t have to suddenly find thousands of pounds from nowhere.
STEP 3
Complete a Self-Assessment
At the end of the financial year you will need to complete a Self-Assessment Tax Return for HMRC (even if you are a student working as self-employed). Unfortunately you can’t opt out of this – if you don’t do it you are at risk of receiving a big fine.
This is where you declare your earnings so that you know how much tax to pay. Again it may seem daunting but if you have all your invoices, receipts and all other paperwork to hand it is pretty straightforward. Even if you decide to pay a bookkeeper to do this for you they will still need all your paperwork. When you register as self-employed with HMRC you will automatically receive paper reminders about your self-assessment so if you change your address, telephone number etc. you must let them know.
A paper tax return is due by 31 October, but an online return is due by 31 January the following year – DON’T MISS THESE DATES!! Your tax payment is due by 31 January.
When you complete your self-assessment online it automatically tells you how much tax you have to pay.
A word of advice
Don’t leave this until the last minute, complete it with plenty of time because if you have problems you will have time to ask for help. HMRC will fine you if you are late so ask for advice if you need it. It is the same time every year so there are no excuses for forgetting!
Money you can claim back
Hooray!
Yes, this is true!! There are certain expenses that are tax deductible (see, another reason to keep those receipts!).
Click here to see how you can be most tax efficient if you are lucky enough to have savings.  The current amounts of Personal Allowances are here: http://www.hmrc.gov.uk/incometax/personal-allow.htm
Areas you can claim tax relief are:
- Professional Fees & Subscriptions – if you belong to a professional organisation, or have paid for a licence to carry out your work.
- Business Mileage or Fuel – this will only count for fuel used when driving to or from a job, and if it has not been reimbursed by the person who paid you for the job.
- Tools & Specialist Clothing – this doesn’t include clothes you normally wear to work, only protective clothing required for the job that is not paid for by the employer. Any tools you have to purchase, repair or replace to get the job done can be claimed for.
- Household Expenses – when you do some of your work from home you can claim tax back from bills such as electricity, gas and business telephone calls. You cannot claim back from rent/mortgage, council tax, telephone line, internet access.
- Travel & Subsistence – Meals, travel, fuel, congestion charge, tolls, parking fees, photocopying, telephone calls. These are all tax deductible if they are related to a job.
