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Tax and VAT Members  

A guide to help you understand some of the basics behind the way self-employed people are taxed.

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This resource offers a guide to help you understand some of the basics behind the way self-employed people are taxed. These notes are not intended to be definitive and, with limited space available, can only deal with the basic principles. They have been prepared using information from the 2021/22 tax year. Please note that the tax and National Insurance (NI) rules are constantly changing ? one reason why professional advice is always important.

This document has been through due diligence, but it is emphasised that no responsibility can be taken for any action made or not made as a result of the contents.

Registration with HMRC

HMRC (Her Majesty?s Revenue and Customs) expect you to Register online ? should be done within three months of starting self-employment or you will face a penalty of at least £100. They will then send you a ten digit ?Unique Taxpayer Reference? number (UTR for short) ? this is important and will stay with you for all of your dealings with HMRC. Registration will cover both tax and National Insurance.

If you get stuck, you can call the HMRC helpline (0300 ? 200 3300) but be prepared to wait in a queue! If you have an accountant, they can help you with this process.

Most illustrators work for themselves and their tax status is ?self-employed?. HMRC is interested in collecting tax and NI on the profit you make. ?Profit? is the difference between your sales income and the allowable expenses in your business.

The tax year

The UK tax year starts on the 6th April and ends on the following 5th April.

So, a tax year starting on 6th April 2021 will end on 5th April 2022, and this is known as the 2021/22 tax year.

The simplest way of declaring your earnings to HMRC is to coincide your business accounts year with the tax year. Note that the ?Making Tax Digital? (MTD) rules that came into force on 6th April 2026 mean that declaration deadlines will be the same for all as MTD is rolled out. Aligning to the tax year, your year-end would be 5th April, (alternatively 31st March, which for convenience, HMRC treat as being the same as 5th April), and you would be reporting the profits made between the 6th April one year and the following 5th April, (alternatively 1st April to 31st March), in the tax return.

The tax return

All people with self-employed (freelance) income are required by HMRC to fill in a tax ret

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