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FREQUENTLY ASKED QUESTIONS

 

If you want to start working as self-employed, you must register with HM Revenue & Customs, but first make sure you have a National Insurance Number. After the registration, you will receive your Unique Taxpayer Reference (UTR) and HMRC will set up the right tax and National Insurance contributions records. You should keep your UTR safe because you will need it when completing your Self Assessment tax return. Agricounts can easily complete this for you or advise you through the process.

This depends upon what your contract says or what your working arrangements are. You can be employed and self-employed at the same time. When defining your employment status, you should refer to the following questions:
a) A self-employed person:
– Runs own business and decides about the type and time of its work
– Bears responsibility for the success or failure of the business
– Have more than one customer at the same time
– Can hire people
– Takes care of the main equipment needed to perform business activities
b) An employed person:
– Has to perform the tasks imposed on their own
– Is told how, where and when to do your work
– Works within fixed hours
– Work for just one person at a time
– is not in charge of the business nor takes responsibility for it, that is the employer’s task
– is paid a regular wage or salary

You may need to register for VAT if you are doing business in the UK as an individual, a partnership, a company, an association, a charity, a local authority or any other organisation or group of people acting together under a specific name.

Registration for VAT is compulsory if your annual turnover exceeds £85,000 or you expect the turnover to be higher than that amount in the next 30 days. However, it may happen that your turnover has exceeded the registration threshold temporarily. In that case, you may apply for exception from registration.

You cannot register for VAT if you sell only goods or services that are exempt from VAT or you are not in business according to the HMRC’s definition.

Note Making Tax Digital is coming into effect April 2019 for businesses above the threshold.

If you are doing business in the UK but your turnover is below the threshold for registration, you may register for VAT voluntarily. Remember to regularly check if your turnover has exceeded the threshold and you need to register.

You may find it beneficial to be able to charge VAT on your sales and claim back VAT on your purchases in various ways. By way of example, if there is a zero VAT rate for the items you sell but you buy standard-rated items, HMRC will give you a VAT refund. Note that if you voluntarily register for VAT, you have the same rights but also responsibilities as in the case of compulsory registration.

Capital Gains Tax is a tax you pay when you make a profit by way of selling assets (e.g. shares or property). Your Capital Gains Tax may be reduced by a tax-free allowance and some additional reliefs. There are also some circumstances under which no capital gain tax has to be paid.

In most cases you do not have to manage your finances on your own. You may authorise an accountant to act for you. In fact, some entrepreneurs find it too complicated or time-consuming to deal with financial matters by themselves. You can avoid many misunderstandings or mistakes if you authorise an accountant to do it for you. HMRC requires a special form for this purpose. Note that you are still responsible for your own tax affairs at all times.

– There are no formation costs

– Sole traders are not required by law to have annual accounts nor to file accounts for inspection. However annual accounts are necessary for tax returns

– Sole traders are unrestricted in the amount and purpose of borrowings (but cannot create floating charges)

– Losses generated by a sole trader can be set against other income of the year or carried back to prior years.

Tax make-up of a Sole Trader

– For a sole trader, tax is generally paid by instalments on January 31st in the tax year, and July 31st following the tax year. 

– A sole trader will pay Class 2 NI and Class 4 NI, depending on their level of profits

SHOULD I TELL THE TAX MAN THAT I LET OUT PROPERTY?

In short.. Yes.. If you already complete a self assessment tax return, you need to complete the
Property Income pages. If you have not completed a self assessment return in the past, you have a statutory duty to disclose the new source of to HMRC before the 5th October following the end of the tax year ending on 5th April. If you fail to notify or disclose the income on time, you could be liable to a penalty or in extreme cases to prosecution.

In any case common sense should tell you that if you have a source of income that HMRC are not aware of (apart from tax exempt savings and ISA’s) then not declaring it, if later discovered, may be looked on as evasion.