Thinking of starting your own business? Whether you’re freelancing, launching a trade, or opening a small shop in Kent, one of the first steps is registering as self-employed. This guide from Aggarwal & Co, your trusted accountant in Kent, walks you through the essentials—what it means to be self-employed, how to register with HMRC, and how to stay compliant from day one.
What Does It Mean to Be Self-Employed?
Being self-employed means you run your own business or trade, and you’re responsible for your own income, taxes, and business decisions. Essentially, you’re working for yourself rather than being employed by someone else.
As a self-employed individual, you don’t have an employer withholding taxes or providing benefits like sick leave or holiday pay. Instead, you’re responsible for managing your own finances and ensuring that your business meets legal and tax obligations.
There are many ways people can be self-employed, including:
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Freelancers: Writers, designers, marketers, and other creative professionals working independently.
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Tradespeople: Builders, plumbers, electricians, and others offering services directly to clients.
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Shop Owners: Those running small businesses, from retail stores to service providers like hairdressers or fitness trainers.
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Online Entrepreneurs: E-commerce businesses, consultants, and digital service providers.
Being self-employed comes with many rewards, like flexibility and the ability to choose your own clients, projects, and working hours. However, it also means you’re responsible for the day-to-day management of your business, including tracking your finances, submitting tax returns, and paying National Insurance contributions.
As a self-employed person in the UK, you are legally required to register with HMRC to pay your tax and National Insurance contributions. This process is essential, as it ensures you’re compliant with UK tax laws, avoiding penalties down the line.
Do I Need to Pay National Insurance?
Yes, as a self-employed individual in the UK, you are required to pay National Insurance (NI) contributions, which help fund state benefits such as the state pension, unemployment benefits, and healthcare.
However, the specific type and amount of National Insurance you need to pay depends on your earnings and the class of NI contributions you’re required to make. There are two main types of NI contributions for the self-employed:
1. Class 2 National Insurance Contributions (NICs)
Class 2 contributions are generally the basic NI contributions that most self-employed individuals will pay. If your profits are £6,725 or more per year (for the 2023/24 tax year), you must pay Class 2 NICs, which are £3.45 per week.
These contributions help you build your qualifying years for the state pension and may also count towards other benefits like maternity allowance or sick pay.
2. Class 4 National Insurance Contributions (NICs)
Class 4 contributions are based on your profits. If your annual profits exceed £12,570 (for the 2023/24 tax year), you’ll need to pay Class 4 NICs. The rate is 9% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
Class 4 contributions don’t directly contribute to your state pension but are a necessary part of your overall tax bill as a self-employed individual.
When Do You Pay National Insurance?
National Insurance contributions are typically paid at the same time as your income tax via Self Assessment. This means that each year, when you file your Self Assessment tax return, you’ll calculate and pay both your income tax and National Insurance. It’s important to keep track of your income throughout the year to ensure that you can set aside enough to cover your NI contributions.
If you don’t meet the minimum threshold for Class 2 or Class 4 contributions, you may not have to pay National Insurance for the year. However, it’s worth noting that if your profits are low, you may still want to voluntarily pay Class 2 contributions to maintain your eligibility for certain state benefits and the state pension.
Why Is National Insurance Important for the Self-Employed?
Paying National Insurance is not just about avoiding penalties — it helps protect your entitlement to benefits and supports your eligibility for the state pension when you retire. The more years of contributions you make, the higher your pension will be when you retire, so staying on top of your NI payments is essential for long-term financial planning.
At Aggarwal & Co, we can help you calculate your National Insurance contributions, ensure you’re compliant with HMRC, and offer advice on how to maximise your tax efficiency as a self-employed individual.
How to Register as Self-Employed in the UK
You must register with HMRC by 5th October in your business’s second tax year—or face penalties. Here’s how to do it:
1. Visit the HMRC Website
Go to gov.uk/register-for-self-assessment.
2. Create a Government Gateway Account
If you don’t already have one, you’ll be prompted to create a login.
3. Complete the Online Form
You’ll need to provide:
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Your name, address, and contact details
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Your National Insurance number
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The date you started your self-employment
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The nature of your business
4. Receive Your Unique Taxpayer Reference (UTR)
HMRC will post this to you within 10 days. Keep it safe—you’ll need it for your tax return.
What Records Do You Need to Keep?
Once you’re registered, you must keep detailed records of your income and expenses. This includes:
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Sales invoices or receipts
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Business-related expenses
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Bank statements
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Mileage logs (if you use a vehicle for business)
Cloud accounting software like QuickBooks, Xero, or FreeAgent can make this process much easier—especially when paired with support from a local accountant in Kent like Aggarwal & Co.
Should You Set Up as a Sole Trader or Limited Company?
Most first-time business owners in Kent start as sole traders because it’s simpler and has fewer costs. However, as your income grows, switching to a limited company might reduce your tax bill.
We can help you decide which setup is best for your situation—book a free consultation to talk it through.
Common Mistakes New Business Owners Make
Avoid these early pitfalls:
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Missing the HMRC registration deadline
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Not saving for tax throughout the year
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Mixing personal and business finances
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Failing to track allowable expenses
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Forgetting about National Insurance contributions
At Aggarwal & Co, we help Kent startups avoid these mistakes and stay financially healthy from the very beginning. Learn more abo
Need Help Getting Started?
Starting your own business is a big step—but you don’t have to do it alone. At Aggarwal & Co, we offer friendly, affordable support for startups and sole traders across Rainham, Gravesend, Ashford, and Sheerness.
We can help you:
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Register with HMRC
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Set up bookkeeping and accounting systems
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Understand your tax obligations
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Plan for growth
Ready to register as self-employed?
If you’re starting a business and need a reliable accountant in Kent, get in touch with Aggarwal & Co today. Book your free initial consultation and take the stress out of going self-employed.
