Any person or individual who decides to start his own practice or business is referred to as a Sole Trader or Self-employed individual. The first of these is Register as self employed with HMRC and, most likely, Set up as a sole trader or freelancer. The business can enroll with HM Revenue and Customs (HMRC) anytime up to October 5, starting from the business’ second tax year. If the business is already registered, a sole trader can use the online service to:

• fill and send tax returns to HMRC
• review and verify the tax return

According to the UK Government, starting business as a sole trader is the easiest way to start a business in the United Kingdom. For a freelancer, to start working as a sole trader, the requirements are:

• Inform HM Revenue & Customs (HMRC) about the self-employment status. Make sure that the National Insurance (NI) number is already in place.
• Register for Self Assessment as a sole trader.
• Register a business name.

Unless there is any industry-specific license needed, a freelancer is free to start working. There is no need to register with Companies House because although it is a legitimate business, it isn’t a company.

It is very simple and straightforward to run a Limited Company.

• The first thing is to form a Limited Company – This will take a few minutes and the company should be set up within a couple of hours. Our team of specialist accountants for freelancers in the UK will also help with Value Added Tax (VAT) registration and setting up a bank account for the business.
• Invoice the clients – A very simple Excel spreadsheet, similar to an expense claim form, to be completed every month.
• Appoint an Accountant – To notify dns accountants, a professional accountant for Sole Trader for accounting and tax advisors regarding any correspondence from HM Revenue and Customs or Companies House and we will take care of it.

The flat rate scheme is an incentive provided by the government to help simplify taxes. The amount of Value Added Tax (VAT) a business pays or claims back from HM Revenue and Customs (HMRC) is usually the difference between the VAT charged by the business to the clients and the VAT the business pays.

Example:

A freelancer bills a client for £1,000, adding 20% VAT to make the total bill amount: £1,200. As an IT consultant, the VAT flat rate charged for the business is 14.5%. Hence, the flat rate payment will be 14.5% of £1,200, or £174.