Freelancer’s Question: Am I required to have a UTR number if I’m working as a freelance artist with a theatre company, on a contract that will pay me a maximum of £10,000 for the year’s work?
I’d like to know — if I had a higher revenue and/or profit, would this affect whether I need a UTR number? And If I changed from sole trader to a limited company, would this colour any requirement for me to have a UTR? Or once you have a UTR is it for life, and not just for Christmas!?
Expert’s Answer: Firstly, it is important to understand what a UTR number is. So just what is a UTR?
A UTR (Unique Taxpayer Reference) helps HM Revenue & Customs identify and process tax returns against the correct taxpayer’s records.
When a UTR is required
As you are a self-employed freelancer in the UK, you are required to have a UTR. The number is unique to you and your business — it will never change.
This becomes a requirement once you start earning more than £1,000 from self-employment during a tax year, which you will more than easily be doing with the contract you refer to.
UTR is indeed for life, not just for Christmas
Then consider, your self-assessment tax return is due every year as of April 6th with a deadline of January 31st, and it summarises your earnings for HMRC so that they can accurately tax you.
And it’s a good question you ask but no, your level of earnings and/or profit does not affect your need of a UTR number. This is your personal UTR for life – and definitely not just for Christmas or the New Year!
You’re not alone of course. The self-employed are not the only individuals required to make a self-assessment return each year; company directors, people with foreign income and those taxpayers whose income exceeds £100,000 a year are a few examples of income outside of PAYE that need to submit to HMRC through self-assessment.
A new UTR if you set up a limited company
You raise the prospect of setting up a limited company. Well, some sole traders make the decision to incorporate their business and become a limited company to, among other reasons, provide them some protection in the event that things go awry. As long as the company formation and director’s conduct are both in line with the Companies Act, the director’s personal assets will not be at risk as a limited liability company.
And while the company – should you set one up — will gain a new UTR, yours will remain for your personal return as a director of the limited company.
UTR, one of three fundamentals to staying on HMRC’s good side
Keep in mind, if you have income outside of PAYE or own a business and don’t act compliantly when it comes to your self-assessment tax return, you could face criminal prosecution.
So do definitely ensure you are registered with HMRC, receive your UTR and even most importantly perhaps, file your self-assessment tax return efficiently and on time!
A helping hand?
If you’re a bit concerned about this responsibility and don’t know what we do, the software we use submits directly to HMRC, making it ideal for freelancers, self-employed sole traders, and anyone else with income outside of PAYE, who wants to log all their income and expenses.
We’re pretty proud of it because the software will even provide you with handy hints and tips that could save you money on allowances and expenses you may have missed!
The expert was Amanda Swales, director at GoSimpleTax.