Friday, 4 November 2022

Things need to be taken care of when filing a self-employed tax return

 First and foremost, a business owner should know whether to register as self-employed or as a limited company. Both registrations are vastly different. Let's see how:

Register As Self-Employed

Register As A Limited Company

Disclosing requirement is less as you are only required to complete a Self Assessment tax return once a year. You can hire Self-assessment accountants in London for this

Disclosing requirements are much more

You are entitled to all the profits you

You are not entitled to all the profits You

You are a business and not the officer of the company. 

In a Limited Company, you are the officer of the company

You have no restrictions on withdrawing funds from your bank account. 

You being a director of the company would be withdrawing as a salary, bonuses, dividend or a loan account.

Pre-Requisition For Setting Up As A Sole Trader Or A Self Employed

Anyone can set up as a sole trader or self-employed but in a few business types, you require to obtain a permit or a license from your local authority. These businesses include a Taxi Driving license, Babysitting, and Selling anything on the street.  At the time of setting up as a Sole Trader one has to follow some legal requirements.

If you will be running your business from home, you need to pay business rates in the area that you are using for your business purpose. For Example – If you are selling bakery items in your store room area or in your garage, you need to pay business charges for that store room or garage.

If you are an IT person and working from your laptop sitting in your bedroom or sitting area, it is unlikely to pay business rates because it is also being used for a domestic purpose – but if the same thing is done making a separate room such as an office, then you will have to definitely pay business rates as this room is only used for your business purpose. You may also need planning permission to work from home, depending on what type of business are you in. Planning permission is required because if your business area is getting a side extension and the neighbours residing there have an issue then at that point in time it becomes necessary for you to take planning permission. Planning permission and the rates for it are different according to your type of business to know about it you need to contact your local authority as every area is different.

Who Registers as Self-Employed?

If you register as self-employed you are not required a lot of administration as compared to a limited company. However, if you are registering as self-employed then you must register by 5th October of the second tax year of your business from when you have started your self-employment or when you have started trading. You may receive a penalty of £100 if you do not register on time and the penalty will increase after three months.

Who Can Be Classified as Self-employed?

Contractors – They work on a contract basis, for example, Plumbers, Builders, Electricians (CIS Tax), Locum GPs and etc.

Freelancers – They work on client-based requirements so it can be on a weekly, monthly or quarterly basis. Once the work is completed you get some other client to work with.

You will receive a Tax-Free code from the “”, which for this Tax Year of 2022/2023 will be 1257L. If your income is more than £100,000 then your personal allowance will be less.

Registering for Self-Assessment Tax Returns for Self-employed

Self-Assessment Tax Return is submitted to HMRC by a Self-Employed person or Sole Trader. For this, you need to fill up a tax return form (either online or hard copy). Note the deadlines for both online and offline are different.

If you belong to the threshold of 85,000, you need to inform HMRC about your sales and expenses in a simple three-line format. There can be a possibility to fill up the full self-assessment tax return if you fall under a certain category that needs full disclosure of expenses. For a new self-employed there are many more things that you need to know. You can get the information on the HMRC website

HMRC will send you the self-assessment tax return in the month of April every year but anyhow if it doesn’t reach you by the end of April, it is your responsibility to inform about this to HMRC or else you will be liable to pay the required penalties. For those who are doing it for the very first time, you will need to fill in a self-assessment registration form first. For this National Insurance Number is mandatory.

Self-employed Registration

The one who is a sole trader /self-employed they have to fill up a CWF1 form to inform HMRC about the type of your business.

The one who is not self-employed has to complete filling out an SA1 form. Once this is done, HMRC will set up Tax Records for you and HMRC will send you a UTR number that needs to be preserved lifelong.

For all this, you can hire an accountant for self-employed in London who will register on your behalf and will get you the UTR number.

Self-employed Self-Assessment Payment Deadlines

You must pay the total amount you owe to HMRC by 31st January. The deadline for payment is the same for both filed online or offline (on paper). You will have to pay both or any one of the following:

• The balancing payment

• The first two ‘payments on account’


You will receive a statement after filing from HMRC stating the amount due for your return. If you do not receive this before your due date of payment, then you have to do it yourself or this can be done by the accountant you have hired.

Self-employed Filing

If you are a Sole Trader, it is mandatory for you to file tax returns annually. If you are a VAT Registered business as self-employed, then your VAT returns should be completed every quarterly or Annually.

This means you will have to not only stay compliant but also be organized every time to help you make the process quick and efficient. When the new Digital Tax Scheme comes into place in the near future all Self Employed Individuals will have to file tax return quarterly in the near future as the new digital tax scheme is going to be the future

While filing a self-employed tax return you need to be accurate in the legal formalities. If you miss any small thing, you will be liable for penalties. So to be on the safer side you must take the help of an accountant for self-employed in London who will register if this is your first time, will file your tax quarterly and will not get you the penalties.

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