How to register as a self-employed or freelancer with HMRC

Various ways to setting up as a sole trader

• not as a self-employed individual
• as a self-employed person or a sole trader
• register as a partner (s) or partnerships

Register as self-employed UTR

A self-employed individual can register for self assessment and Class 2 National Insurance (NI) immediately after opening a business. To register, a sole trader needs a Unique Taxpayer Reference (UTR), a 10-digit number. The UTR can be found on prior tax returns or other HMRC documents, such as notices to file returns or payment reminders. If the UTR is lost, a sole trader will automatically be sent a UTR when he/she registers for self assessment or at the time of setting up a limited company. This 10-digit number, at times, can have a letter “K” at the end. It may be called a tax reference. A sole trader can also call the self assessment helpline and ask for the UTR.

Register as self-employed for national insurance and tax

The major advantage of working as a sole trader or a self employed individual is the ease of operating and managing the business. Once an individual starts operating as a sole trader or through a business partnership, he/she becomes accountable for paying the income tax and National Insurance (NI) on their own or through a small business accounting and taxation consultant like dns accountants. The business can register with HMRC anytime up to 5 October, from the second tax year of the business. A tax year is from 6 April to 5 April. For example, if an individual starts a new business as a self-employed or a sole trader in March, the individual must register until 5 October. However, if the first self-employment work is undertaken in May 2023, an individual needs to register as a sole trader with HMRC until 5 October 2024.

Also, once an individual starts operating as a sole trader or self-employed, it becomes imperative to complete a self-assessment tax return every year and pay the National insurance (NI) contribution. Registering with the HMRC is a fairly simple process and there is very little paperwork involved and a sole trader does not have to pay any company formation cost. However, a sole trader needs to formally register with HMRC, and assume responsibility to pay his/her income tax and National Insurance liabilities.

Also, as a sole trader, the business owner needs to pay Class 2 National Insurance contributions (NIC) on the income. For the tax year 2023-2024, the NIC is £3.45 a week. But, if the business has a profit of less than £6,725 a year for the tax year 2023-2024, the business is not required to make these NI contributions. For the tax year 2023-2024, 9% of the annual profit ranging between £12,570 and £50,270, and 2% of the profit above £50,000 must be paid as Class 4 National Insurance contributions.