It's important to let HMRC know that you're self-employed as soon as possible - even if you already fill in a Self Assessment tax return each year. If you don't tell them, you may have to pay a penalty.
You can let HMRC know about your self-employment by completing the Self Assessment registration forms. HMRC will use the information to set up the right National Insurance records for you too.
Registering for Self Assessment
As well as registering for Self Assessment you’ll need to arrange to pay Class 2 National Insurance contributions straight away. You'll need to pay £2.50 per week for the 2011-12 tax year.
However if you expect your earnings to be below £5,315 for the 2011-12 tax year, you may not have to pay Class 2 contributions. See the section 'What to do if your earnings will be low' if you think that this applies to you).
The most convenient way to pay Class 2 National Insurance contributions is by Direct Debit.
Paying by Direct Debit has many advantages:
Go to form CA5601 Application to pay Class 2 contributions by Direct Debit
If you are unable to pay by Direct Debit, HMRC will send out payment request for payment on 31 January and 31 July.
If you expect your income from the business to be low for the tax year you may not have to pay Class 2 National Insurance contributions. You have to apply to be excepted first. Follow the link below to find out more.
Go to form CF10 Self-employed people with small earnings
When you start self-employment it may be a while before you get your first tax and Class 4 National Insurance bill. So it’s a good idea to set aside some money from the start. You can download a ready reckoner that may help you budget for this, if your tax affairs are straightforward. This will give you a rough idea of how much tax and Class 4 National Insurance a single self-employed person, with no other taxable income, would need to set aside.
Download 'Budgeting for your first self-employed tax bill' (PDF, 81K)
If you are thinking of taking someone on, or already employ someone else, please see our introductory guidance on PAYE for employers.
Introduction to PAYE for employers
Introduction to National Insurance
You don't have to register for VAT until your taxable turnover reaches a certain limit, but there's plenty of advice available when it does. Follow the links below to find out more.
Giving your business the best start with tax (PDF 352K)
If you are going to be working for one person or firm, you may be an employee rather than self-employed. For more information you can:
Use the Employment Status Indicator
If you are a contractor and or sub-contractor in the construction industry you must also register with the Construction Industry Scheme (CIS). Follow the link to find out more.
Getting started with CIS - contractors, subcontractors and tax agents
