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United Kingdom (UK) - Self-Employment and Business Start Ups

Starting a business requires a long decision-making process, from the type of business to the type of legal structure. Business start-ups can be registered as sole traders, limited companies or business partnerships. Each option will require different tax documents. If employees are hired then there will be tax documents submitted for each worker, and employee taxes must be paid by the employer.

The choice of business type is also determined by the responsibility a business owner wishes to personally take for their business. Depending on the business structure, liability in business can translate into liability as the owner. For this reason, incorporating a company in order to separate personal and business finances is often a popular choice.

Due to the Internet, self-employment is easier now than ever before. It is possible to start a company without employees and without registering a name. Internet registration of a company name is different from registering it to pay taxes in the United Kingdom. A self-employed person will pay taxes based on a self-employment tax form. If there are workers for the company, a self-employed person can call them freelancers and give them commissions. Commissions are deductions on the tax paperwork, but it is not “taxable employment income” under the same terms as a registered business.

Business Partnership

There is a self-assessment form available to register a business partnership. The form tells the United Kingdom which tax returns need to be submitted and the responsibility of the owners to pay these taxes. Each year the personal self-assessment tax return, income tax, and national insurance report will need to be submitted by the elected partner. Any losses and bills for the business will need to be recorded.

Sole Trader

Legally the same documentation needs to be kept for a sole trader in order to show the sales, spending, bills, profit and losses a business makes. Any employee wages also need to be recorded. The difference is that the sole trader is the only one responsible for making payments.

Limited Company

There are a couple of forms of limited companies, including a partnership option. A limited company refers to the liability of finances and taxes being solely the responsibility of the company and not the individuals owning the company. There are a host of legal responsibilities for limited companies, especially if there are multiple shareholders. This company will pay a corporation tax rather than a self-employed tax.

Social Security for Self-Employed People and Businesses

As a self-employed person or business owner social security is dependent on self-assessment. The self-assessment mentioned above for taxes is the same form that tells the HMRC that a person needs to make national insurance contributions. There are two payouts for national insurance: Classes 2 and 4. The class one has to pay into is based on the amount of income the company generates. Self-employment benefits are typically lower in payout due to a lower contribution to the government program.

VAT for Self Employed People

VAT, or value added tax, is also something a business owner must take into consideration. If the turnover in the company is more than £80,000 then VAT registration is required. Anything below the stated value means that a person or company does not need to pay VAT on top of their other contributions and taxes.

Resources for Self Employed Individuals or Businesses


HMRC offers details regarding taxes, social security, and business registration to help an individual get set up. There is a section for each type of company or employment status, as well a list of paperwork needed.

A website for all business, employment, and tax questions. can help a person locate an accountant, register for a licence or permit, and set up a company.

Prospects AC

Prospects AC is a website offering grants and other information regarding self-employment and business start-ups. On this site an individual can find out whether any financial support is available to help set up a business or gain work grants to pay employees.

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