This video is all about How to Register with HMRC for Self-Assessment because you are self-employed. Some things might look repetitive, but really it’s not, honest.
So being self-employed is the simplest way of getting money from the work you do. The bookkeeping is again, extremely simple because technically all you need is a record of your fee income or your sales and a record of what you believe are your allowable costs.
Yes, you do need to keep all the receipts etc, which we’ll come onto later!
I’ve put there that all the money is yours. Well, that’s absolutely correct. There is no paying salary to yourself because it’s your business. You get all the money. Very, very different to limited companies, so just beware.
Technically, not all the money is yours because you potentially will have a tax bill to pay. You must register for self-assessment. That is absolutely vital. You do have until the 5th of October in the year following when you set up.
For example, if you set up your business on the 25th of July in year one, you have until the 5th of October in year two to actually register. However, my advice would be to register as soon as you’re ready to trade as a self-employed person or a sole trader. It’s much easier, you know you’ve done it.
Remember, even if you earn £2,000.00 worth of fee income, you need to be registered as self-employed. You might not pay any tax, but you have to get it in there and you might decide to pay your Class 2 National Insurance voluntarily to start building up your years.
Being self-employed is based on what we call your profit, so that’ll be your fee income less your allowable expenses. This gives you profit that you then take off your personal allowance.
If you have PAYE as well, you have to combine your self-employed profit with your PAYE gross earnings. you then take off your personal allowance. What some people make the mistake of is here’s my fee income, take off my personal allowance, then tax it at 20% and then I get to take off my expenses. That’s not how it works.
It’s based on your fee income less allowable expenses gives you a profit, less your personal allowances and then you get taxed on that. Okay? I know we’ve kind of jumped off the subject but…
You are able to have a PAYE job as well as being self-employed, so a PAYE job is when somebody else is paying you on a weekly or monthly basis and they give you a payslip and it’s known as taxed at source, so the easiest way is to look at it is look at the payslip and if you have a proper tax code in there like 1250L that is the first indicator you are taxed at source on PAYE. The second indicator is if you have your National Insurance number in there and the National Insurance code, if it’s not put as X, then definitely you are being treated as a PAYE employee.
If the tax code says NT and the National Insurance code says X, then you’re being treated as self-employed and that is the only way to really establish if you are employed or self-employed. It can be a bit of a pain because some people like to run sole traders or freelance people or self-employed people through the payroll system because it’s an easier way of paying them.
Got it, What’re the next steps…
Okay, so you have to know if you’ve already got a Government Gateway account, so if you’ve been on tax credits or Universal Credit or anything else to do with benefits you may already have a Government Gateway set up, but it isn’t set up for being self-assessed. For the majority of people watching this, you won’t have any self-assessment account and so you will need to set up a Government Gateway or a digital tax account and this link here is how you get to it.
It’s quite handy to watch this video if you are going to set up your account live because you can keep pausing it and then you know what’s coming next, but here we go.
So, you go onto that webpage and the first thing you’re asked for is your email address. I always advise people to get a proper email address whether it’s Gmail, Hotmail, Yahoo or something else rather than using a student account at your college, university, drama school because eventually, they will disappear.
Enter your email address. They will then send you a code to that email address, so log onto your email and you’ll get a six-character code and that will go into this box in here. Click confirm and when done that it will say, yay that is the correct one and they have confirmed your email address.
It then asks for your full name. Now, this is normally your birth name. It is not your equity stage name or any other name you might go under. It is your legal name, so if you have changed your name legally by deed poll, then that’s the name. If you are married, then that will be your married name going in there, so that is your official name. Then create a password. It does not have to have any special characters in it. It will reject if you try and put special characters in it. Create your password and continue.
Then to add to the fun it then says okay thanks very much and we now need to set up a recovery word if you forget your password, you can go through the recovery process in order to get this back, so set up a recovery word and it has to be a proper word and it’s only full of letters, no numbers, no special characters, just letters.
Having done all that, you then get your user ID. Whatever you do, you must write this down. You must keep it, print it, whatever, keep it very, very, very safe. It’s a real pain to try and find it again and go through the government helpline and the online services.
Now you want to register for taxes, so it gives you a choice of what taxes you could register for and the reason why you want to register. We are registering as a new business, so we’re registering new self-employment, so you want to tell HMRC that you are now in business and you want to register and then it tells you after that these are the type of things that you can register for in a bit more detail.
Now you can see here, the one you want here will be self-assessment. Click next and now given those choices it now says, which one do you want? So you’re going to go for self-assessment. It thinks, okay that’s fine, so why do you want self-assessments? Well, it’s because you are self-employed and here you’ll see that self-employed, sole trader and sole proprietor are all the same things, they’re just words that people use that are interchangeable, so go for self-employed.
Now, here is the first thing you need to be aware of. It will ask you the effective date of you becoming self-employed:
Now that could be quite easy because you could be self-employed as soon as you leave college or another date, so you just put in the real date there. However, what you want to avoid is putting in the 1st, 2nd, 3rd, 4th and 5th of April because as we know the tax year runs to the 5th of April, so if you put in any of those first few days of April it will think then you’re going to do a tax return for the previous year and then not the current year you’re looking at, so just be really, really, really careful what you put in here, okay.
Next and it just gives you a quick heads up that these are the things you need to have in front of you, so you’ll know your full name and date of birth. You’ll hopefully have your contact details, so that’ll be your address. Click next. This just confirms where you are in the process. It will look very strange that you’re going to be entering things twice.
The reason being is the first one is all about you as a person and the second version is all about your business. Now, actors, musicians, dancers, etc, mainly your business is just your name again and it’s based at your home, so it will look like you’re entering everything twice and you think oh okay, so just be aware of that. You’re not going around in a loop. It is about you and then about your business. Click next.
Okay, so it wants to search for your address. Now I advise people that if they’re still friendly with their parents, you might want to use your parental address, especially if you keep moving and the thing about actors, musicians, dancers, etc you do keep moving, so you might have a contract in London, and then you moved to Bristol and instead of commuting to Bristol, you know the jobs in Bristol you move there, but you must always then update HMRC. Otherwise, use your home address and keep remembering to update it if you do move.
Enter your postcode and then click find address. To protect the innocent or the not so innocent at the time, you then get this is your address. It will ask if you’ve been there for less than three years and if you have click yes. The date that you currently moved into this current address and then click next and then it will ask you for exactly the same details for the previous address, but there is an option as before that it’s a non UK address, so you might’ve just moved into the country from the USA, so you’ve only been here a year setting it up, so your non-UK address and it’ll just ask for a bit more detail on that or you put in your postcode for your previous address.
The next screen is about you the person. Now you would have thought you’ve already entered your name, your full name, so it would remember it, but it doesn’t, so you have to enter again this time with your title, your full name here, and if you’ve ever changed name if you’ve got married and you changed your name, if you select yes, then you’ll be able to enter your previous name. Your date of birth & National Insurance Number.
All these items here whether you’re a share fishermen, a director, an underwriter, not an undertaker sorry that was a slip, an examiner, etc, minister of religion, I would imagine all these here will be no, so everything from share fishermen down, are you in the construction industry I would imagine we’ll be no, so that’s fairly simple there. If you have done tax returns before, then you can put in your previous unique tax reference number, but that potentially won’t apply to any of you, unless you’re coming into the industry late and you have had jobs before and now you’re converting to being an actor and this is the other trick question, are you working for one person or firm only? This should always be no.
It raises a whole load of implications if you put yes. It might be a case of, well, yes, because I’m only working for Cameron Mackintosh Limited on one of his shows, but as a self-employed person you need to be working for more than one firm and potentially you could be working in a big show in the West End but you do odd concert work etc that’s paid for, so that means you’re definitely not working for one person and also some West End contracts only last for six months, so you potentially will be working for more anyway, but always put this as are you working for more than one person? Yes.
About the Business
This is where it starts to repeat yourself, so this is now about the business, so when did you start working for yourself? Well, you’ve already told them that a few screens ago, so make sure you put the same date in. If you have to go back, then you’re able to go back and view that date and put it in. If you are trading under an equity name or a different name you can put that in, so it could be Harry Clave, which is his proper name and Clave Music could be his trading name, so that would go in here and what sort of business, well you can put in there actor, musician, music teacher, dancer etc all that would go in here.
Then you have to put in the address.
It gives you a view of what you’ve entered, so you can check what you’ve entered to make sure it’s okay and then sticking point number three is this bit down here. You never, ever, ever want to tick that the reason we’re doing this is so you can be registered for self-assessment and if you do it online you get an extra three months to do it, so you get until the 31st of January and by not ticking this, it will set up the account for you and that is what you need, so never, ever, ever, ever tick this button.
Then you get a confirmation that okay, we’ve done all that. Here is my acknowledgement to say yay, it’s done, it’s done. Again screenshot that, print it, save it because if like in six months time, you haven’t heard from them, you can phone the helpline and say I registered online. This is the acknowledgement registered reference I’ve got, what’s happening?. Okay, so make sure you keep that.
You then have to do a final declaration to say I’ve given you everything that I need to give you. What capacity are you filling it, well your option is you are the sole trader. You are the applicant and then you just tick the box to say yes I declare everything is correct and then it will take you to your business tax summary, so there you go.
So what will happen is you will get sent a unique tax reference number. That will only come through the post, so you need to know that and then you’ll be sent an activation code, so when you do get the activation code, you can go back onto this account using your user ID and password you set up right at the very beginning and activate your self-assessment, and then that should be it.
You are already set up. Whatever you do, do not try and do this in January because it’s likely that things won’t come in the post to you. Even late December it’s likely that things won’t get through the post with the Christmas mail and everything like that, so do it early enough. Okay, so that’s brilliant.
That is how you set up a self-employed. Thanks so much. Bye.