Registering for income tax and national insurance

When should I register for income tax and national insurance?

You must tell HM Revenue & Customs (HMRC) that you are now self employed;HMRC deals with your income tax and national insurance. You notify HMRC by completing form CWF1 which can be completed online. We can complete and submit this form on your behalf. This form doubles up for notification of both income tax and national insurance. If this is not submitted within three months from being on your feel, then you will be liable to a penalty of £100.

There are four different classes of national insurance. As a self employed barrister you will be liable to pay class 2 and class 4 national insurance. Class 2 national insurance is charged at a weekly flat rate. For 2016/17 the rate is £2.80 per week, payable if earnings exceed £5,965 per annum. Class 2 NIC is paid with the January balancing payment.

Class 4 national insurance is based on the net profit from your practice and is paid over at the same time as you pay your income tax. For 2016/17 there is no charge if your profits are less than £8,061. Profits of between £8,061 and £43,000 are charged at a rate of 9% and any excess profit above £43,000 is charged as 2%, without any upper limit.

Are you paying too much NIC?

If you have employment income (for example, from work as a lecturer) as well as your self employed earnings, you should take care to ensure that you do not pay more in national insurance contributions than you need to. National insurance will be payable in respect of both your employment and self employment, and the total could exceed the annual maximum. If you apply for 'deferment' of contributions then you can reduce the contributions you need to pay now - without a deferment you need to pay the full contributions due and reclaim any excess later, which will have an adverse impact on your cash flow.

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.