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There’s a lot to organise when starting out as self-employed, but in amongst the business cards and new client list, spare a moment for Self Assessment.
People who are employed have all of their tax and National Insurance contributions taken care of by their employer. But when you go self-employed it means being the boss. This means being the one responsible for sending a Self Assessment tax return to HMRC.
Self Assessment tells HMRC how much money you have earned as a self-employed person, plus any other income. HMRC use that information to calculate your Self Assessment tax bill, as well as how much you need to pay in National Insurance contributions.
If you are self-employed, such as a sole trader or freelancer, and your self-employed income is more than £1,000, then yes, you need to submit a Self Assessment tax return to HMRC (though there are other types of people who need to submit them, too!). If you earn less than £1,000 from self employed income in a tax year, you’re covered under the trading allowance, and don’t need to submit a return.
Some people are self-employed and working for an employer as well. You will still need to submit a Self Assessment tax return if your self-employed income is more than £1,000. This is so that HMRC know how much you owe on the income you earned working for yourself.
The Personal Allowance is the amount you can earn in a tax year before starting to be taxed on it. It tends to increase slightly with the cost of living. Check this year’s Personal Allowance.
Once you register as self-employed for tax, you’ll need to submit a Self Assessment return every year. You will need to submit a return even if you don’t earn anything, or earned less than the Personal Allowance.
To complete a Self Assessment tax return, you’ll need to register. The deadline for registration is 5th October, after the end of the tax year in which you went self-employed.
For example, if you went self-employed in August 2019, then it’s classed as the 2019/20 tax year. You’ll need to register for Self Assessment by 5th October 2020.
Registering for Self Assessment doesn’t happen automatically, so you’ll need to let HMRC know. They have a Self Assessment Helpline available on 0845 900 0444, or register online.
The deadline for submitting your Self Assessment tax return depends on how you plan to submit. If you’re submitting your return online, the submission deadline is 31st January the year after the tax year ends. You can submit as soon as the tax year is over though. This gives you much more time to get it right, and to pay your bill in instalments!
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