How to Deregister as Self-employed?
Understanding Self-Employed in the UK
A person is considered self-employed if he or she runs the business for himself or herself and the onus of making it a success lies solely on him, rather than a third person unless appointed so. Although having a self-employed status has its own share of benefits, not to mention the freedom of ownership it brings along, it is not covered by the employment law. It is advisable and highly recommended to consider various pros and cons of being a self-employed person and must consider the below-mentioned lines:
The number of self-employed workers has been increasing ever since 2001 and as per the statistics, the number of self-employed workers has increased from 3.3 million to approx 4.8 million by 2017. Being a self-employed has its own share of advantages such as you are your own boss and have the flexibility and control along with exploring your creative and entrepreneurial side as you grow in your business. However, like any other good thing in the world, self-employment has its own share of disadvantages as mentioned below:
- Finding or setting up a marketing strategy and acquiring clients can be quite a challenging task in the beginning?
- Your income is not guaranteed and you are not sure of your income, especially during the few initial years and thus find it difficult to plan fixed and mandatory payments such as rent, mortgage, loan, and living expenses.
- If you are on holiday and unwell, you cannot claim holiday leave as in the case of employment.
- If you are self-employed it is difficult to maintain work-life balance i.e. difficult to separate your work life from home life and at times it tends to take a toll both on your physical and mental health.
- Self-employment tends to add isolation factors in your life because you are too busy in making sure your business achieves success and thus gets isolated and cut-down from your friend circle.
- For the initial few years of your business i.e. till the time your business has got a solid grasping, you have to take care of its admin requirements such as bookkeeping and regulations with compliance.
- The onus of success and failure of the business is only on you and no one else so you have to be sure enough to start or enter into the world of self-employment.
- It is difficult to get approval if you want to rent out a property because you would be asked more documents to support your loan requirement.
Process of De-Register As Self-Employed
However despite having a fair share of advantages over the traditional employment route, many of the self-employed leave the self-employment route in between for various reasons and opt for the employment option. HMRC has been prudent enough to foresee the possibility of a person shifting from self-employment to employment and thus included the required provisions and guidelines which need to be followed if one wants to do so. Like there is a checklist which you have followed while registering yourself as self-employment with the HMRC, you need to follow the same in case you want to de-register yourself i.e. you must tell HMRC that you have decided to stopped trading as a sole trader or if you have decided to leave or end a business partnership.
On receipt of your notification regarding cancellation of self-employment status, HMRC will then cancel your Class 2 National Contributions (NIC). However, before you go ahead and inform the HMRC about the same, you must take the following actions:
- Overlap relief: If you have stopped trading for almost a year now, you can use this relief in order to prevent yourself from being taxed twice on your profits.
- Terminal loss relief: This relief is provided and can be claimed to offset a loss made in your last tax year against the profits made in the 3 previous tax years.
- Calculate your final profits and loss.
- If you were having your business with a partner then with your decision of leaving it will also end the business partnership and you have to make sure that the nominated partner also sends a final partnership tax return as per the deadline mentioned by the HMRC.
- Send your expenses and benefits returns.
- Enter a leaving date on every employee’s payroll record.
- Give every employee a P45 on their last working day.
- Check the “Final Submission because scheme ceased” box.
- Deduct and pay any outstanding tax and National Insurance to HMRC within 17 days.
- Enter the date on which you have closed your PAYE scheme in the “Date Scheme Ceased” box. You need to enter the present or past date only and not the future date.
De-registering yourself from being self-employed opens the door to various advantages which you can avail now such as holiday pay, sick pay to name a few and also saves you from the financial perils of being a self-employed and as per the adage – No one and nothing is perfect. It is you who have to work to make it perfect and the same goes for being self-employed or employed under someone else.
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