Being self-employed or owning your own business has many advantages, it allows you to be your boss and work on your schedule,
it means you can work in your pyjamas with your favourite songs on, and it means that you get to reap the benefits of your initiatives and smart business.
However it also means that you are going to have to spend a good deal more time exercising your planning for specific profit and expenses, will need to complete regular tax returns and organize your national insurance.
Furthermore, it can cause you to ask how much can you earn self employed before paying tax? There can be difficulty in acquiring a mortgage or loan and can be challenging if you become too ill to work.
There are no convenient P60 or wage forms and so whatever you earn and may need to be accounted for yourself – and if you follow these guidelines, you should be able to steer clear of trouble.
If you are new to self-employment and it is your number one source of income then you could earn over £11,000 without having to pay taxes.
This is because everyone in the UK is entitled to a personal allowance for the year. This personal allowance is tax-free. For the tax year 2018 – 2019 the personal allowance is £11,850.
However, don’t assume that if you earn less than this then you don’t have to pay any tax.
Remember that if you also work in an employment job then your personal allowance could have been used up already.
So always speak with a tax expert to go over your tax return before filing it so that you don’t end up overpaying in penalties for errors.
How to Get Started
If you’re preparing a company or going self-employed, you first need to learn which category you fall under. If you don’t have staff, then you are probably a ‘sole trader,’ which describes most kinds of freelance work.
However, if all your work is for a single client and company, then it can still turn out that you are technically an employee.
Guidelines on the HM Revenue and Customs website can help you determine exactly which category you and your business fall into.
As soon as you’ve decided on this, you then need to register with HM Revenue that can be done online on the same site.
This is a fairly quick process and must be completed as soon as you start working for yourself to avoid being billed for previous earnings (likewise, however, you should not register until you’ve begun work).
Those quitting a prior job need to ensure they receive a P45 and payslips for their records.
End of Year Tax Filing
From here you’ll receive confirmation that your registration has been successful and you won’t need to do anything else regarding tax until you’re issued a tax return.
Important note: Yes you will need to complete a tax return even if you earned a low income for the year and even if you did not make any profits. Don’t get caught out by ignoring your tax return filing date.
This can occur randomly, but generally, it’ll be at the close of the tax year (the tax year starts and ends in April). As soon as you receive this form, you will need to fill it in as accurately as possible including all incomings and outgoings to ensure you aren’t over or undertaxed.