How to De-register Yourself as Self-Employed: A Clear Guide

If you’re self-employed, there may come a time when you need to de-register yourself as self-employed. This could be because you’ve stopped trading, you’ve changed your business structure, or you’re no longer meeting the criteria for self-employment. Whatever the reason, de-registering is a straightforward process that you can do online or by phone.

To de-register as self-employed, you’ll need to contact HM Revenue and Customs (HMRC) and let them know that you’re no longer self-employed. You can do this by calling their helpline on 0300 200 3310 or by de-registering online. You’ll need your National Insurance Number and your Unique Taxpayer Reference (UTR) to hand when you contact HMRC.

Once you’ve de-registered, HMRC will update their records and you’ll no longer be required to submit self-assessment tax returns. However, if you owe any tax or National Insurance contributions, you’ll still need to pay them. If you’re unsure whether you need to de-register or how to do it, it’s a good idea to seek advice from an accountant or other financial professional.

Understanding Self-Employment

Self-employment involves managing your own business and finances. Learn about self-employed status, responsibilities, and accounting services tailored for sole traders.

In this section, we will define self-employed status and discuss the responsibilities of a sole trader.

Defining Self-Employed Status

Being self-employed means you work for yourself, not as a company employee. Explore small business accounting for more insights.

If you are self-employed, you are responsible for finding clients, providing services or products, and managing your business finances. You are not an employee of a company, and you do not receive a regular salary or benefits.

Responsibilities as a Sole Trader

As a sole trader, you are responsible for managing your business finances, including keeping accurate records of your income and expenses. You will need to complete a Self Assessment tax return each year and pay income tax and National Insurance on your profits.

It’s important to note that as a sole trader, you are personally liable for any debts your business incurs. This means that if your business goes bankrupt, your personal assets could be at risk.

To avoid this risk, you may want to consider setting up a limited company. This will provide you with more protection and limit your personal liability.

In summary, being self-employed can be rewarding, but it also comes with significant responsibilities. As a sole trader, managing finances involves keeping records and understanding taxes. Consider exploring bookkeeping services to streamline this process.

Preparing to De-Register

Before you de-register as self-employed, it is important to take a few steps to ensure that you are making the right decision. This section will guide you through the process of preparing to de-register.

Assessing Your Business Status

The first step in preparing to de-register is to assess your business status. Take a look at your business structure and determine whether you are still considered self-employed. If you have recently incorporated your business, you may no longer be self-employed. If you are unsure about your business status, consult with an accountant to help you determine whether you are still self-employed.

Consulting with an Accountant

Consulting with an accountant is an important step in preparing to de-register. An accountant can help you determine whether de-registering is the right decision for you and your business. They can also help you understand the tax implications of de-registering and provide guidance on how to proceed.

During your consultation, your accountant will likely ask you to provide information about your business, such as your income and expenses. They may also ask you to provide information about your personal finances, such as your salary and any other sources of income. This information will help them determine the best course of action for your specific situation.

Evaluate if de-registering as self-employed is right for you. If your business structure has evolved into a limited company, different accounting practices apply.

The De-Registration Process

If you’re no longer self-employed, you can de-register yourself as self-employed with HM Revenue and Customs (HMRC). Here are the steps you need to follow:

Notifying HM Revenue and Customs

The first step is to notify HMRC that you’re no longer self-employed. You can do this by calling the HMRC hotline at 0300 200 3310 and informing them that you have ceased being self-employed. Alternatively, you can de-register yourself as self-employed online through the Government Gateway. You’ll need your National Insurance Number and your Unique Tax Reference (UTR) number to do this.

Completing the Stopping Self-Employment Form

Once you’ve notified HMRC, the next step is to complete the Stopping Self-Employment form. This form is used to inform HMRC that you’re no longer self-employed and to provide details of your final tax return. You can complete the form online through the Government Gateway or by post.

When completing the form, you’ll need to provide your personal details, such as your name, address, and National Insurance Number. You’ll also need to provide details of your self-employment, such as the date you stopped trading and the reason for stopping. You’ll also need to provide details of your final tax return and any outstanding tax liabilities.

Once you’ve completed the Stopping Self-Employment form, HMRC will process your request to de-register as self-employed. It’s important to note that you’ll still need to submit your final tax return and pay any outstanding tax liabilities before you can be de-registered.

Notify HMRC about ceasing self-employment and complete necessary formalities. For those in partnerships, explore partnership accountancy services for specialised assistance.

Financial Considerations

If you have decided to stop being self-employed, you need to take care of your financial affairs before you can completely de-register yourself. In this section, we will discuss the financial considerations you need to keep in mind when de-registering yourself as self-employed.

Finalising Your Tax Affairs

Before you can de-register yourself as self-employed, you need to finalise your tax affairs. This means that you need to file your final tax return, which will show your profit or loss for the period you were self-employed. You also need to make sure that you have claimed all allowable expenses and capital allowances that you are entitled to.

Handling Capital Gains and Allowances

When you de-register yourself as self-employed, you may need to pay Capital Gains Tax (CGT) on any gains that you have made on assets that you have sold. You may also be entitled to Entrepreneurs’ Relief, which can reduce the amount of CGT that you have to pay. You should also make sure that you have claimed all other reliefs and refunds that you are entitled to.

Claiming Reliefs and Refunds

When you de-register yourself as self-employed, you may be entitled to various reliefs and refunds. For example, you may be entitled to Overlap Relief if you have paid tax twice on the same income. You may also be entitled to Terminal Loss Relief if you have made a loss in your final year of trading. You should make sure that you have claimed all reliefs and refunds that you are entitled to.

When de-registering, finalise your tax affairs. For insights on company accounts and tax returns, these resources can be helpful.

Post De-Registration Requirements

Record Keeping after De-Registration

After de-registering as self-employed, it is essential to maintain accurate records of your business transactions for at least five years, including receipts, invoices, and any other relevant financial documents. These records will be crucial for tax purposes and may need to be presented to HMRC upon request. Organising your records in an orderly manner will facilitate the process of providing evidence of your business activities, should it be required.

Dealing with VAT and PAYE

If you were registered for VAT, you should inform HMRC of your de-registration and settle any outstanding VAT liabilities. Similarly, if you operated a PAYE scheme for employees, ensure that you complete the final payroll reports and make any necessary final submissions to HMRC. It is important to adhere to these requirements to ensure compliance with tax regulations and avoid potential penalties or legal issues.

Special Circumstances

If you are self-employed and are facing special circumstances, such as leaving a business partnership, exiting the Construction Industry Scheme (CIS), or dealing with insolvency or voluntary agreements, there are important steps you need to take to de-register yourself as self-employed.

Leaving a Business Partnership

If you are leaving a business partnership, you need to inform HM Revenue and Customs (HMRC) that you are no longer self-employed. You also need to inform your business partner(s) that you are leaving the partnership. You will need to file your final self-assessment tax return and pay any tax due before you can de-register as self-employed.

Exiting the Construction Industry Scheme

If you are exiting the Construction Industry Scheme (CIS), you must inform HMRC that you are no longer self-employed in the construction industry. You will need to file your final self-assessment tax return and pay any tax due before you can de-register as self-employed.

Insolvency and Voluntary Agreements

If you are insolvent or have entered into a voluntary agreement, you may need to de-register as self-employed. You should seek professional advice from an insolvency practitioner or a financial advisor to understand your options and obligations.

In some cases, you may need to file a final self-assessment tax return and pay any tax due before you can de-register as self-employed. It is important to keep accurate records of your income and expenses to ensure that you are paying the correct amount of tax.

By following these steps, you can de-register yourself as self-employed under special circumstances. It is important to seek professional advice if you are unsure about your obligations or options.

Potential Pitfalls and Penalties

As a self-employed individual, it is important to be aware of the potential pitfalls and penalties that may arise when de-registering from self-employment. In this section, we will discuss two of the most common pitfalls and penalties that you need to be aware of.

Late Filing and Payment Penalties

If you fail to file your online form or pay your estimated tax bill on time, you may be subject to late filing and payment penalties. The penalties for late filing and payment can be significant and can add up quickly if you do not take action to resolve the issue.

To avoid late filing and payment penalties, it is important to ensure that you file your online form and pay your estimated tax bill on time. You should also keep accurate records of all your income and expenses, as this will help you to complete your online form accurately and on time.

Incorrectly Calculated Estimated Tax

Another potential pitfall when de-registering from self-employment is incorrectly calculating your estimated tax bill. If you underestimate your tax liability, you may be subject to penalties and interest charges.

To avoid this, it is important to ensure that you calculate your estimated tax bill accurately. You can do this by keeping accurate records of all your income and expenses and using HMRC’s online tax calculator to estimate your tax liability.

In addition to late filing and payment penalties and incorrectly calculated estimated tax, you should also be aware of class 2 national insurance contributions. If you fail to pay your class 2 national insurance contributions on time, you may be subject to penalties and interest charges.

To avoid penalties and interest charges, it is important to ensure that you pay your class 2 national insurance contributions on time. You can do this by setting up a direct debit or paying online using HMRC’s payment portal.

By being aware of these potential pitfalls and penalties, you can take steps to avoid them and ensure that your de-registration from self-employment goes smoothly.

Transitioning to Employment

If you have decided to transition from being self-employed to being employed, there are a few things you need to consider. In this section, we will discuss how to determine your employment status and how to set up a limited company.

Determining Your Employment Status

Before you can transition to employment, you need to determine your employment status. This will help you understand what your rights and responsibilities are as an employee. There are three main types of employment status:

• Employee: You work for an employer and are paid a regular salary or wage. You have certain rights and protections under employment law.
• Worker: You work for an employer, but you are not an employee. You may be paid a regular wage or work on a casual basis. You have some rights and protections under employment law.
• Self-employed: You work for yourself and are responsible for your own finances and taxes. You do not have the same rights and protections as employees or workers.

To determine your employment status, you should consider factors such as who controls your work, how you are paid, and whether you have to provide your own equipment. You can use the government’s employment status tool to help you make a decision.

Setting Up a Limited Company

If you have decided to set up a limited company, there are a few things you need to do. First, you will need to choose a name for your company and register it with Companies House. You will also need to appoint directors and shareholders.

Once your company is set up, you will need to open a business bank account and register for VAT if your turnover is over the VAT threshold. You will also need to file annual accounts and tax returns with HMRC.

Setting up a limited company can be a complex process, so it is important to seek professional advice if you are unsure about any aspect of it. You may want to consider hiring an accountant or a company formation agent to help you with the process.

In summary, transitioning from self-employment to employment requires careful consideration of your employment status and the steps involved in setting up a limited company. By taking the time to understand your options and seeking professional advice where necessary, you can make a successful transition and enjoy the benefits of being an employee or a director of a limited company.