Pension / National Insurance / Self-employment question....

Secret2ndAccount

You are working. You are working for yourself - you don't have an employer. You are about as legitimately self employed as it gets.  You should register with HMRC as self employed. Nothing to stop anyone claiming to be self employed when they aren't, other than it's illegal and you could get fined or theoretically go to jail.

As a self employed person you get the bargain rate for voluntary Class 2 contributions and you should take advantage of it. You will discover that all your accounting works one year behind - first you need a year of accounts, then the following April you can submit a tax form (a simple one if your affairs are as simple as you say) and that's when you pay your NI. So I doubt you are going to be able to register as self employed, come up with a year's accounts for 2021/22, submit a tax return, and pay the NI, all by the deadline of Jan 31st. Do some reading to figure out what you want to choose as your accounting year, so you can be well prepared for the subsequent tax years.

Don't be frightened by the word Accounts. You keep a list of how much you got paid, and anything you necessarily spent in order to earn it. The difference is your profit, and that determines your tax and NI. Your accounts can fit on one page. It is possible you get your NI year for free if your profit lands between the two numbers you noted.

Unless your lifespan is severely limited, the NI contribs are a bargain. Where else could you pay in 800 (in your case <200) and get out 250/yr for the rest of your life? If there was such a place, people would be lined up around the block waiting to pay in thousands of pounds. For info, if you went to an insurance company with 800 they would offer you less than 40/yr for life.

2nd for info: suppose your career goes well and you make a long term deal with a publisher. Now you are working for one company. Now HMRC might start asking whether you are self employed or whether you are actually an employee.

Marcon

Secret2ndAccount said:

2nd for info: suppose your career goes well and you make a long term deal with a publisher. Now you are working for one company. Now HMRC might start asking whether you are self employed or whether you are actually an employee.

No; authors are a special case, as are other creatives.

JennyP

Secret2ndAccount said:

You are working. You are working for yourself - you don't have an employer. You are about as legitimately self employed as it gets.  You should register with HMRC as self employed. Nothing to stop anyone claiming to be self employed when they aren't, other than it's illegal and you could get fined or theoretically go to jail.

As a self employed person you get the bargain rate for voluntary Class 2 contributions and you should take advantage of it. You will discover that all your accounting works one year behind - first you need a year of accounts, then the following April you can submit a tax form (a simple one if your affairs are as simple as you say) and that's when you pay your NI. So I doubt you are going to be able to register as self employed, come up with a year's accounts for 2021/22, submit a tax return, and pay the NI, all by the deadline of Jan 31st. Do some reading to figure out what you want to choose as your accounting year, so you can be well prepared for the subsequent tax years.

Don't be frightened by the word Accounts. You keep a list of how much you got paid, and anything you necessarily spent in order to earn it. The difference is your profit, and that determines your tax and NI. Your accounts can fit on one page. It is possible you get your NI year for free if your profit lands between the two numbers you noted.

Unless your lifespan is severely limited, the NI contribs are a bargain. Where else could you pay in 800 (in your case <200) and get out 250/yr for the rest of your life? If there was such a place, people would be lined up around the block waiting to pay in thousands of pounds. For info, if you went to an insurance company with 800 they would offer you less than 40/yr for life.

2nd for info: suppose your career goes well and you make a long term deal with a publisher. Now you are working for one company. Now HMRC might start asking whether you are self employed or whether you are actually an employee.

Thank you. Another really helpful post. I have to file tax returns anyway (in fact, I've just done 21/22) so that isn't a biggy. I think when I file 22/23, I will start the self-employment then and pay the NI, because I sealed the deal on these books in June and that's when writing began in earnest, though I won't see any money till after April 23. 

jamesperrett

I think that there is a minimum threshold of something like £1000 of income before you need to register as self employed. A few years ago I had a letter from HMRC telling me that I no longer needed to fill in a tax return because I didn't earn enough from self-employment.

Secret2ndAccount

If you earn more than £1000 from self employment in a tax year (April to April) then you are required to register for self assessment. However, it might be in your interests to register as self employed before that. For example, you can pay Class 2 NI contribs even if your business makes no money at all, as many might in their early days. If your business has made a loss, this can be subtracted from other income and might save you some tax.
You can use a standard deduction of up to £1000 for all expenses without itemisation (or indeed without there being any expenses). So if your business income is less than £1000, you will never pay any tax, but declaring that income could be helpful in getting certain benefits. The deduction is limited to your actual income, so you can lower your profits to zero, but you can't create a loss.

JennyP

Secret2ndAccount said:

If you earn more than £1000 from self employment in a tax year (April to April) then you are required to register for self assessment. However, it might be in your interests to register as self employed before that. For example, you can pay Class 2 NI contribs even if your business makes no money at all, as many might in their early days. If your business has made a loss, this can be subtracted from other income and might save you some tax.
You can use a standard deduction of up to £1000 for all expenses without itemisation (or indeed without there being any expenses). So if your business income is less than £1000, you will never pay any tax, but declaring that income could be helpful in getting certain benefits. The deduction is limited to your actual income, so you can lower your profits to zero, but you can't create a loss.

That's all really helpful, thank you. Registering as self-employed - I must admit I'm not 100% sure how to do that. Do I literally just put on my tax return that I've been self-employed that tax year? So in April, when I fill in the 2022/23 tax return, I state I was self-employed during that tax year and at that point, I'll get an option to pay the Class 2 NI contributions? 

calcotti

https://www.gov.uk/set-up-self-employed