Like many of the large courier and logistics companies in the UK, GSS utilise a network of self-employed contractors to help service contracts.
Being a self-employed owner / driver gives many people the flexibility they need to earn money in a way that suits their lifestyle with the great thing being, the harder (and smarter) you work, the more money you earn. But, what does it mean to be self-employed and what steps do you need to take to ensure you are registered correctly for paying taxes?
Being Self-Employed
According to the Goverment website, being self-employed means you work for yourself. This can be part-time or full-time, but you basically have some control over the way you work.
Taking Control
The key aspect of being a self-employed driver is that you need to take control. As an employed person, certain things – such as tax and national insurance – are left to your employer. But, working for yourself means you now have the responsibility.
If you are setting up as self-employed from being in a job, ie. employed, firstly, you need to decide how you are going to do it.
You’re self-employed if you:
- Run your business for yourself and take responsibility for its success or failure
- Have several customers at the same time
- Can decide how, where and when you do your work
- Can hire other people at your own expense to help you or to do the work for you
- Provide the main items of equipment to do your work
- Are responsible for finishing any unsatisfactory work in your own time
- Charge an agreed fixed price for your work
- Sell goods or services to make a profit (including through websites or apps)
Self Employed (sole trader)
This means that YOU are your business and all of your earnings, expenditure and tax get lumped together with other earnings you may make from other employment. Many people start self-employed as it’s less costly to administer tax and accounts, but you are personally responsible for all financial obligations.
Firstly, you will need to register with HMRC for self-assessment. You do not need to register immediately, but you must register by 5 October in your business’s second tax year and you could be fined if you do not. Nb. Each tax year runs from 5th April-5th April. So, for example, if you decide to start working for yourself on 1st June 2018, you would need to register as self-employed before 5th October 2019.
HMRC give you a unique taxpayer reference (UTR) and you also be automatically enrolled for self-assessment.
Our advice would be to do register as soon as you can. Staying on top of any tax burden is essential. Remember, your income tax doesn’t automatically come out of your wages so you will owe it to HMRC.
Limited Company
You can run your business as a private limited company. This means that you create a company which is legally separate from you as an individual. It has separate finances from your personal ones and it can keep any profits it makes after paying tax.
As a rule, becoming a limited company is about restricting liability and tends to be more of a safety net for bigger companies with large turnovers. But, it may suit the way you want to run your business.
The administration is slightly more complicated and you will need to set up a limited company, with directors and shareholders.
Sales, Costs and Profit
Whether you are a self-employed driver or a limited company, you charge the going rate for your services. You also claim various costs that are incurred to perform the tasks you need to offer your services. This may include vehicle hire, insurance, fuel, professional fees.
When you take away your costs from your sales and it is agreed by HMRC, you are left with your profit. This is subject to tax, but the remaining amount is your final net earnings (take home pay).
Management
Once you begin as a self-employed driver, it is very important that you keep accurate records of your business accounts. It helps to set up a separate bank account to keep all your income and outgoings in one place away from your personal finances.
Whether you are self-employed or a limited company, you must keep all receipts for costs and a list of your sales and income. You could hire a bookkeeper to do this or there are many online solutions to help, such as Xero or Quickbooks.
Whatever you do, do not ignore it. Take control early and stay on top of your paperwork.
Each year, you will need to file your records with HMRC. Limited Companies have to file accounts and you will need an accountant for this.
For self-employed people (sole traders) you will either need to find a company who can do this for you (there are many small businesses that offer this service) or file your own self-assessment.
VAT
You may choose to register for VAT (Value added tax). The current minimum to do this is if your turnover is £85,000 or more. In basic terms, you charge VAT on top of your services (currently 20%) and you can claim VAT on your purchases from companies charging you VAT. You pay HMRC the difference between the two.
For more information see our section about VAT.
Other Obligations
As a self-employed driver, offering a service or product to another company or individual, you have an obligation to ensure your business complies to all current laws and regulations.
This includes health and safety law, insurance and public liability obligations, as well as UK employment law if you employ people directly.
You may also need to adhere to customer contractual obligations if you have entered any agreements with another company.
