All work at home mums who are making money from their wares or services need to register as self-employed. It’s a simple process and one which can cost you dearly if you don’t do it before earning cash. It’s 100% free but the consequences of not being registered can include paying a fine.
If you plan to run your business as a sole trader rather that setting up a limited company then it’s essential you register as soon as you’re seeking work or marketing your goods.
When to Register
As already mentioned registering self-employed has to take place as soon as you are actively looking for work for your business. It has nothing to do with income and whether you start to earn money in six days or six months makes no different – it’s the seeking work that counts.
Even if you are currently in employment you must also register as self-employed when you reach this point and the risk of not registering self-employed within three months of the end of your first month of business you could face a fine of £100.
If you set your business up as a limited company you do not need to register as self-employed because you are classed as an employee of your business. In this instance you’ll need to set up a PAYE system to pay yourself from the business account.
The only other exception applies to subcontractors working in construction. You need to register with the HMRC Construction Industry scheme and further information about this is available in this HMRC guide.
What Happens Afterwards?
Once you’re registered you’re officially a self-employed mum. You also become a self-assessment tax payer which means you have to fill out a tax return every year. Your tax return is where you detail your earnings and if you have another job you will also need to list any other income and benefits.
Being self-employed also means you need to keep all financial records of your business so you can adequately complete your tax return or alternatively pass your complete financial records to your accountant.
As well as paying tax (if you earn over the threshold) you will also need to pay your National Insurance Contributions and in some instances may need to pay VAT.
How do I register?
You can register by going online and filling out this form if you’re a sole trader and there is a separate one for partnerships although you and your partners will need to fill out separate forms.
Alternatively you can telephone the HMRC on 0845 915 4515. You can even choose to send it by post if that’s your preferred method.
Quick Self-Employment Checklist
This checklist is a quick rundown of all you need to remember when becoming a self-employed mum.
- Check with the HMRC whether your business needs any permits
- Register as self-employed using one of the above methods
- Set up a direct debit or save a percentage of your earnings to pay your National Insurance Contributions
- Find out whether you need to pay VAT
- Set up a financial records keeping system
- Ensure you fill in your tax return on time to avoid penalties
Self-employment doesn’t have to be daunting but work at home mums need to know their legal requirements. Simply registering in a few short minutes can be the difference between operating legally and illegally. Below are a few more points to clear up any doubt.
I’m not sure what I’m doing counts as self-employment
If you receive payment from another person for any service or product which doesn’t go through a PAYE system means you need to register self-employed. This could be anything from selling homemade goods to building websites.
I have a full time job – do I need to register?
As mentioned if you’re making money from a side business in anyway then you must register as self-employed. It won’t affect your full time job in any terms other than needing to declare your earnings on your tax return.
I’m not turning profit and don’t expect to soon – do I need to register?
Registering as self-employed is about the action of seeking work, not making profit. As soon as you are seeking work as a sole trader or in partnership you must register and you must also fill out your tax return annually.