Mama Means Business: Going Self-Employed And Applying For Self Assessment
For the last few month, I have been steadily earning money with my blog, which is pretty awesome: I do what I like, for it around our family life, I can stay at home with the kids and the extra income is always welcomed. But the work does not stop by completing the sponsored posts and getting paid for it. After any earned income we ought to pay tax. It doesn’t matter how much money we earn and how frequently, income tax has to be paid after every penny. And if you are employed elsewhere and you’re on a payroll but you’re making some extra cash with freelancing or with your small business, then yes, you need to declare the extra income too.
So, great I’m making money, I need to pay tax, how do I go about it?
First, make sure you always get paid on time. Here are some great tips on that. Once you are actually paid for the delivered service, let’s claim it.
HMRC uses the Self Assessment system to collect Income Tax. Firstly, if you’re also employed and already paying tax (deducted from your wage), then you need to contact HMRC and then them – they will then adjust your tax code.
If you’re going completely self-employed and you’ve never done this before, then you have to register for a Unique Taxpayer Reference. The easiest way is to do it online (you need to have or create a Government Gateway account for this). You then will receive a letter from HMRC with your UTR, and activate the service using the code you’ll be sent in the post. (You have 28 days for this, otherwise you will need to start again – I did this, so make sure you open the letter and activate with the code!)
After this process you can choose to file your self assessment tax online or by downloading and sending back the forms. All you need to do is keep tracking all your incomes and business related expenses and fill the forms in. (Keep your receipts.)
HMRC will also take care of your National Insurance contribution. You usually pay 2 types of National Insurance if you’re self-employed: Class 2 if your profits are £6,025 or more a year and Class 4 if your profits are £8,164 or more a year. (2017/18)
- The current personal tax allowance is £11.500, so if you earn this much or less, you don’t have to pay tax. (But you still have to declare it and return the forms!)
- The tax year runs from April to April
- You should register within three months after receiving your first payment
- The last date you can register is the 5th October
- The paper and online tax return deadlines are different, whilst the paper returns must be completed and sent off by the 31st of October, the online version has a deadline of January.
- You need to pay your taxes till the end of January.
- if you feel unsure about the whole process you can always call any of the Self Assessment Contact Numbers
This is a collaborative post.