Financial Issues

Q: What are the tax implications of being self-employed?

By law everyone has to pay income tax and National Insurance contributions whether employed or self-employed. Self-employed individuals must arrange these payments for themselves. You need to register as self - employed within 3 months of starting up in business to avoid fines.

For more information, or to register as self-employed, phone the HM Revenue & Customs New Self-Employed helpline on 08459 154515 or visit the web site at www.hmrc.gov.uk

If your taxable turnover has exceeded the limit stated on the www.hmrc.gov.uk website in the last 30 days or will do so in the next 12 months, you have a legal obligation to register for VAT. However, even if your turnover is below this threshold it may be advantageous for your business to register. For example, if your business requires you to purchase large amounts of raw materials you can claim your VAT back, which in turn may help the business' cash flow. If in doubt speak to an accountant who will be able to advise you in more depth about the VAT implications applicable to your business.

Starting a Business