- I’m self-employed, how do I pay my tax?
- Can you help me with monies owed?
- Saving for retirement when you’re self-employed
I’m self-employed, how do I pay my tax?
As a self-employed worker, you are required to register with HMRC. Failure to register can lead to penalties. Self-employed workers with an annual trading income less than £1,000 can take advantage of the trading allowance, and do not need to register for self-assessed tax returns. However, you would not then be eligible to make Class 2 National Insurance Contributions, which earn credits for the State Pension.
A self-employed person working in the UK normally pays income tax and National Insurance Contributions (‘NICs’) on profits. You or your accountant first calculates your profits for accounting purposes, but different rules may apply for tax, so your taxable profit is not necessarily the same as your accounting profit. Taxable profits are what you have left after deducting business expenses from your taxable income.
If your turnover (total business income) is, or soon will be, above the VAT threshold, you may have to register for VAT and charge it on the work you do. Separate registration is required for VAT – it is not enough to have registered as self-employed.
Bectu provides specialist tax advice to our self-employed members. If you are a member and require personalised tax advice please get in touch.
Can you help me with monies owed?
We help freelance members who’ve not been paid with monies owed cases. Most of the time a letter from us results in payment. Where this approach fails we will seek legal advice on your behalf.
Where a monies owed claim has to go to law, we can provide you with a briefing on the Small Claims Court which is designed to support claimants without the need for legal or professional representation.
Find out more about the range of legal services offered to Prospect members here.
Bectu sector of Prospect’s membership also provides access to a range of legal services. Find out more here.
Saving for retirement when you’re self-employed
Our three top considerations about saving for retirement if you are self-employed
Has your engager used the deferral period?
Under the 2008 Pensions Act you may be designated as a ‘worker’ for auto-enrollment purposes. This requires your engager to enroll you into an automatic enrollment qualifying pension scheme.
The engager may choose to make use of a deferral period of up to three months before automatically enrolling you into their pension scheme, which is commonly NEST.
You can opt in to the scheme immediately. You just have to ask to be enrolled into the scheme. You will receive notification that the engager has used the deferral period which will provide information on how you can opt in.
Do you know what a Lifetime ISA (LISA) is?
LISA’s were introduced with the aim of encouraging saving for a first home or for retirement. There are restrictions on who can open a LISA, how much money can be contributed and when the money can be drawn. The Government adds a 25% bonus to your savings up to a maximum of £1,000 per year.
Members may wish to consider using a LISA to help save for retirement. You can find out more information here: https://www.gov.uk/lifetime-isa.
Have you considered opening a personal pension?
If you are self-employed you do not have an incentive to save for retirement from employer pension contributions. However this does not mean that opening a pension isn’t a good way to save for retirement. There are providers that would be able to offer a personal pension to you as a self-employed worker. Members may wish to consider setting up a personal pension to save for retirement.
Get support as a member
Speak with your representatives:
If you work in an organisation that has local Bectu representatives, you should speak to them about any work-related issues.
Call the member contact centre on 0300 600 1878 or email [email protected]