From Lawpack's Tax Answers at a Glance.
When you begin self-employment it's very important that you (or your accountant) tell HM Revenue & Customs that you have begun in business, partly so that the correct tax can be paid on time and partly so that the appropriate National Insurance contributions are paid.
Anyone beginning self-employment must register with HM Revenue & Customs within three months from the end of the month in which the self-employment commenced. Failure to meet this deadline can result in a £100 penalty.
There are two forms which you should complete for the tax authorities that are obtainable from any HM Revenue & Customs office:
- 'CWF1 Notification of Self-Employment'; and
- 'CA5601 Application to Pay Class 2 Contributions by Direct Debit'.
Do bear in mind that if your profits or share of profits for 2006/07 are below £4,465, you may claim exemption from paying Class 2 contributions. This is only sensible if you have other earnings on which you are paying contributions.
Self-employment worries can be taken care of (and avoided) if you choose an accountant to handle your accounts and to advise you about the resulting tax liabilities.
1 September, 2006