What Are The Responsibilities Of A Self-Employed Person?
You don’t want to get into trouble with the law and HMRC? First step is to make sure you know what your responsibilities as a self-employed person are. Second step is to follow them. Not necessarily a fun part of running a business but being your own boss comes with responsibilities too. When you start working for someone, a part of your job is to know what you have to do, what is expected of you and by when. If you fail doing any of these things, you can lose your job. This works in a similar way, however, the consequences of not complying with the regulations can be more serious. Let’s look then at the responsibilities of a self-employed person.
Keeping business records
One of the responsibilities of a self-employed person is to keep business records and make sure these records are accurate and complete. You don’t have to keep anything in a paper format. It’s great news if you’re concerned about the environment but also for efficiency reasons. Digital records are quicker to organise and you don’t have to spend time printing anything off. We’ve written a helpful article on keeping business records organised. Don’t forget to check it out. You’ll find in it useful tips that will also save you time.
Filing tax returns and paying tax
Actually, not only filing but filing them on time. As a self-employed person you have to be familiar with the self-assessment tax returns deadlines. Not submitting your tax returns on time will result in HMRC issuing you with self-assessment penalties that will only add to your tax bill. Once you calculate your profit and submit your tax return, you also have to make sure you pay the tax before the deadlines. Unless you make a loss. Does this responsibility not lie with your accountant if you have one? No. In the eyes of the law you are responsible for your taxes not your accountant. If you have an accountant who helps you with your self-assessment tax returns, you have to make sure you provide them with all the information and paperwork and that you do it with plenty of time for them to prepare things for you. Don’t leave things till the last minute but also don’t rush and try to submit your tax return on the first possible date. Find some balance and make sure what you’re reporting to HMRC is correct. You can be fined for deliberately submititng incorrect or incomplete tax returns.
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Paying your business’s debts
Yes, you read it right. As a self-employed person, you are responsible for all the debts your business makes. Hopefully, you’re not in this situation and you’ll never be but you should know about it. Self-employment means your business is you and if it’s you, it means any debts are your debts too. So, let’s say your business has no money to pay its supplier. Your supplier can still demand a payment and you will have to pay it out of your own pocket and a supplier can go to court with it. This responsibility for all the debts is different to how it works with limited companies. It’s because a limited company is a separate legal entity to its owners. With self-employment this isn’t the case unfortunately.
Keeping an eye on tax changes
This doesn’t probably sound like fun either but unfortunately it is one of the responsibilities of a self-employed person too. Tax rates can change, deadlines can change, rules can change too. You don’t have to stay up to date with the whole tax system, but you definitely need to know anything that can apply to sole traders and to your particular situation. This can be something like what expenses you can claim as a self-employed person or changes in the self-assessment deadlines or frequency.
Registering for VAT
VAT can concern any business regardless of its type, so this includes self-employment too. If you go over the VAT registration threshold, it’s your responsibility as a self-employed person to register for VAT, charge correct VAT rates on your sales, submit VAT returns and pay VAT to HMRC. But even before this happens, you are responsible for keeping an eye on your taxable turnover to know when you go over the VAT threshold. HMRC is not going to inform you about this, but if you miss it, you will face the consequences. Make sure you know the threshold and that you regularly monitor your turnover. Accounting software like Xero can help you with this and it can make it much easier to handle.
Looking for a professional and friendly accountant for your self-employed business? Get in touch with our Oxford accounting office. We help businesses from the whole UK.
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