Self-employment and limited company registration

Now that you have made the decision to set up in business here’s a quick overview of the basics for what you need to do to get yourself started as a self-employed individual, partnership or a limited company.

Register As Self-Employed;

You need to register as self-employed with HMRC as soon as you start your new business. Even if you’ve completed tax returns before, you’ll need to register for Self-Assessment and Class 2 National Insurance as a self-employed individual.

If you are going into partnership with someone else you will both need to register as self-employed individuals and also register the business partnership.

You should register at the earliest opportunity, however there is a deadline; legally you need to register by 5 October after the end of the tax year in which you became self-employed.

For example, if you have started your business in July 2019, you will need to register with HMRC by 5 October 2020. If you haven’t registered by 5 October in your business’s second tax year, you could be liable for a fine.

How to register as self-employed

You will need to create a Government Gateway account. This will require your full name, email address and a new password. HMRC will send you a user ID for the next steps.

Use your ID and password to sign in and register as self-employed for Self-Assessment tax and look for the option to add a tax, duty or scheme.

You’ll be asked “what type of tax do you want to add?” Choose Self-Assessment, then choose your category; sole-trader or partnership.

Now add the date you started trading, which is the day you started working for yourself and getting paid.

HMRC will need some extra information, including your National Insurance number, home address, contact details and other information related to your new business.

You’ll be asked what sort of self-employed work you do. This is so HMRC can make sure you are taxed appropriately, and can help you if you claim tax back. Give a basic summary, such as “hairdresser” or “plumber”.

Double check your information and submit.

Once your application has been received, HMRC will send you a letter with a 10-digit Unique Taxpayer Reference (UTR), which you’ll use on tax payments.

After which you will officially be self-employed!

Register A Limited Company;

There are several steps involved in forming a limited company including; deciding on the type of company; choosing a company name; deciding on the company officers and filing registration documents with Companies House;

What type of company?

Most freelancers, contractors, start-ups and small businesses will opt for a Private Limited Company, as Public Limited Companies (PLCs) must have a minimum share capital of £50,000, at least two shareholders, two directors and a qualified company secretary

For those looking to promote a business with community benefit you may choose to form a Community Interest Company (CIC). This is a limited company with special additional features, created for the use of people who want to conduct a business or other activity for community benefit, and not purely for private advantage.

Choose your name

Much like a web address, your company name has to be completely unique. You can differentiate in a few ways to guarantee a unique name – for example, a limited company name can use either “Limited” or “Ltd.” (i.e. “AOS Limited” or “AOS Ltd.”). You can check if the name you want to use is available on the Companies House website.

Choose company officers

All limited companies must have at least one company officer who is responsible for the business at all times. Private limited companies need to have at least one company director, but since the implementation of the Companies Act 2006 they are no longer legally obliged to appoint a company secretary, although they may still decide to do so.

Choose your registered address

This address will be made public and is used by Companies House and HMRC to send official notices to the company. It should also appear on all company documentation such as invoices. It cannot be a PO Box address.

Form the company

New companies are formed and registered at Companies House and you will need to supply a selection of formal documents that essentially act as the groundwork from which you operate. These are known as:

• Memorandum of Association

• Articles of Association

These articles govern how the business is established and run from the point of opening.

Register the company with Companies House;

Register a limited company yourself

You can register your company with Companies House online. It takes 24 hours to register and costs £12 to submit your online registration. You will need to provide all the details as above and can download templates for these documents from the Companies House starting a company section.

Using a company formation agent

There are lots of company formation agents to choose from such as companiesmadesimple.com and they will handle all the paperwork and submit the documents to Companies House for you and it can take as little as three hours.

This is more often the preferred option for setting up a private limited company as in nearly all cases the formation process can include additional services such as company bank account opening and provision of a registered office address at the same time.

After that you’re good to go!