During the pandemic, HMRC introduced a workaround for those who needed to register for self-employment and obtain a Unique Taxpayer Reference (UTR) but could not get a National Insurance Number. Continue reading as we outline the next steps you need to take to ensure you are registered as self-employed for National Insurance purposes.
Why do I need to register as self-employed?
Once you start working for yourself, you will need to register as self-employed with HMRC to pay tax on the money earned through self-employment. HMRC recommends that you register as soon as possible. However, you can do this any time up to the 5th of October of your business’s second tax year.
As a result of the COVID-19 pandemic, the Department of Work and Pensions (DWP) temporarily suspended face-to-face interviews in connection with National Insurance Numbers (NINo) applications for individuals who came to the UK.
As a temporary measure, HMRC advised that anyone who needed to register for self-employment and had not obtained a NINo should complete an SA1 form instead of the CWF1 form that you usually are required to complete.
Important information if you completed the SA1 form
The SA1 form registers a person for self-assessment tax returns. However, it does not notify HMRC of your intention to become self-employed. The CWF1 form is used to formally announce your intention to HMRC that you are starting your own business or becoming self-employed. The CWF1 form is important as it ensures you are paying the right amount of Income Tax and National Insurance Contributions (NICs).
If you began self-employment between the 6th of April 2020 and the 5th of April 2021, you would be required to complete and file your first self-assessment tax return by the 31st of January 2022 for the 2020/21 tax year.
If you have not registered as self-employed, HMRC will not expect you to pay Class 2 NICs. Therefore, it will not be included as part of your tax liability when you complete your 2020/21 tax return, resulting in you underpaying tax.
Why is it important to make sure you are registered as self-employed for National Insurance purposes?
Apart from it being a legal requirement to register yourself as self-employed, there are other benefits to registering as self-employed with HRMC, which include:
- HMRC will properly calculate your tax, and you will have peace of mind knowing that you are paying the correct amount of tax.
- National Insurance Contributions pay for certain benefits, including State Pension and Universal Credit. Certain benefits are also based on the contributions you’ve made.
How to check your Class 2 National Insurance position is correct
Class 2 NIC is due at a rate of £3.05 for each week you are trading and earn profits above the small profit’s threshold of £6,515 for the 2021/22 tax year.
If you registered for self-employment using an SA1 form instead of a CWF1 form, you should call HMRC’s National Insurance helpline to check your Class 2 NIC position and calculate any payment due.
How to pay tax and National Insurance when you are self-employed
Each year you will need to complete and submit a self-assessment tax return for the previous tax year. For the 2020/21 tax year, you’ll need to submit a tax return by the 31st of October for paper returns and the 31st of January for online tax returns. As part of the tax return, you are required to declare your total income and expenses. Once you’ve submitted the return, you’ll be told how much tax and National Insurance is due.
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