Going Self-Employed in Chester? Your Quick Start Guide!

Author: Phillips & Co Accountants, Chester

Date: May 9, 2025

Taking the leap into self-employment is an exciting step. Whether you’re starting a new business, freelancing, or becoming a sole trader in Chester, getting your affairs in order from the outset is crucial. This guide from your local accountants Chester explains the basics of getting registered with HMRC and setting up your financial foundations.

What Does “Self-Employed” Mean for Tax?

For UK tax purposes, you’re generally considered self-employed if you run your business for yourself and take responsibility for its success or failure. You’re not paid through PAYE (Pay As You Earn) by an employer for that work. This includes sole traders and partners in a partnership.

When Do You Need to Register?

You must register for Self Assessment with HMRC if your gross income from self-employment is more than £1,000 in a tax year (which runs from 6th April to 5th April).

The deadline for registering is 5th October in your business’s second tax year. For example, if you started your self-employment in June 2024 (which falls in the 2024/25 tax year), you would need to register by 5th October 2025. However, it’s best to register as soon as you start trading to avoid any potential issues or forgetting.

How to Register for Self Assessment:

1. Government Gateway Account: If you don’t already have one, you’ll need to create a Government Gateway user ID and password on the GOV.UK website. This gives you access to HMRC’s online services.
2. Register Online: Once you have your Government Gateway account, you can register for Self Assessment online. You’ll need to provide information such as:
   • Your full name, date of birth, address, and contact details.
   • Your National Insurance number.
   • The date you started your self-employment.
   • The nature of your business (what you do).
   • Your business name (if you have one) and address.
3. Receive Your UTR: After successfully registering, HMRC will send you a Unique Taxpayer Reference (UTR) number. This is a 10-digit number that you’ll need for all your dealings with HMRC regarding Self Assessment. Keep it safe! You’ll usually receive this by post within 10-15 working days.
4. Activation Code: You might also receive an activation code by post to activate your online Self Assessment account fully.

Setting Up a Business Bank Account – A Crucial Step

While not always a legal requirement for sole traders at the very outset (unlike limited companies), it is highly recommended that you open a separate bank account for your business finances as soon as possible.

• Why is it important?

  • Clarity and Organisation: Keeping business income and expenses separate from your personal transactions makes record-keeping significantly easier and more accurate. This is vital for completing your tax return correctly and understanding your business’s financial health.
  • Professionalism: Using a business bank account can present a more professional image to clients and suppliers.
  • Easier Tax Returns: When it comes to preparing your Self Assessment, having all your business transactions in one place will save you (or your accountant) a lot of time and reduce the risk of errors or missed allowable expenses.
  • Future-Proofing: If you plan to apply for business loans, use certain payment processors, or eventually incorporate as a limited company, a dedicated business account is often a prerequisite.
  • Tracking Business Performance: It’s much easier to monitor your business’s cash flow and performance if its finances aren’t mixed with your personal spending.

• How to set one up:

  • Research the different business bank accounts available. Many high street banks and digital-only challenger banks offer accounts specifically for sole traders and small businesses.
  • Compare fees, features (like accounting software integration), and customer service.
  • You’ll typically need to provide proof of your identity and address, as well as details about your business (like your UTR once you have it, and the nature of your business). The exact requirements can vary between banks.

What Happens After Registration and Setup?

Once registered and with your financial systems taking shape, you’ll have several key ongoing responsibilities:

• Keep Accurate Business Records: This is vital. You need to keep records of all your business income (sales, invoices) and allowable business expenses (e.g., office costs, travel, stock), ideally managed through your separate business bank account.
• File an Annual Self Assessment Tax Return: You’ll need to complete and file a tax return each year, detailing your income and expenses so your tax liability can be calculated.
• Pay Income Tax and National Insurance: Based on your tax return, you’ll need to pay any Income Tax due on your profits and Class 2 and Class 4 National Insurance contributions (NICs). Compulsory Class 2 NICs have recently been abolished for many, but you’ll still be credited, and Class 4 NICs are based on your profit levels.
• Consider VAT: If your taxable turnover reaches the VAT registration threshold (currently £90,000 as of April 2025), you’ll need to register for VAT.

How Your Accountants Chester Can Help:

The process of registering as self-employed, setting up robust financial practices, and managing your ongoing tax obligations can seem daunting, especially when you’re focused on building your business. This is where your local accountants Chester can provide invaluable support:

• Guidance on Self-Employment Status: Confirming if you are indeed self-employed for tax purposes.
• HMRC Registration Assistance: Helping you navigate the registration process correctly and on time.
• Advice on Business Banking: While we don’t open accounts for you, we can discuss the importance and what to consider.
• Bookkeeping Advice and Systems: Advising on the best ways to keep your financial records organised from day one, often linking with your business bank account.
• Self Assessment Tax Returns: Preparing and filing your annual tax returns accurately, ensuring all allowable expenses are claimed to minimise your tax liability.
• National Insurance Advice: Explaining your NIC obligations.
• VAT Registration and Returns: Assisting with VAT if and when it becomes applicable.
• Ongoing Tax Planning: Providing proactive advice to help you manage your tax affairs efficiently as your business grows.

Starting your self-employment journey is a significant milestone. By understanding your responsibilities, setting up good financial habits like a separate business bank account, and seeking professional advice from accountants Chester when needed, you can ensure you start on the right foot with HMRC.

Ready to take the plunge or have more questions? Contact your local Chester accountants today for a consultation!