The short version of the Self-employment page for limited company directors

This article provides a summary of the short version of the Self-employment page of the Self Assessment tax return if you’re required to complete it and you have a limited company FreeAgent account type.

You’ll only need to complete the Self-employment page when you’re a limited company director if you have a self-employed business in addition to the income you receive from the company of which you’re a director. If you don’t have an additional self-employed business, you won’t need to complete this page.

There are two different versions of the Self-employment page: the short version and the long version. You can find out more in HMRC's guidance on the short and long versions of this page.

We are not authorised by HMRC to provide accounting or tax advice. Therefore, FreeAgent’s Support team cannot advise you on how to fill in your tax return correctly or check your figures to see if they are correct, unless they have been calculated by the software. If you’re unsure whether a figure on your tax return is right, please speak to your accountant or to HMRC.

Who should use the short version?

If you have a self-employed business in addition to your income as a limited company director, you're preparing accounts for a full accounting year and your sales during that period were under £85,000, you’ll usually be able to use the short version of the Self-employment page. If your sales were over £85,000 you’ll need to use the long version.

If your self-employed business is preparing accounts for less than a full year and your annualised sales were under £85,000, you will usually be able to use the short version.

Annualised sales figures are calculated as a proportion of your sales during the accounting year. For example, if you began trading on 1st January with an accounting year end date of 5th April, and you made £16,500 sales during that time, your annualised sales would be calculated as £16,500 x 12/3 = £66,000. If your annualised sales were over £85,000 during that time, you’d need to use the long version.

You’ll need to use the long version of the Self-employment page if you are using the averaging method for farmers, market gardeners, writers and artists, or if you have overlap profits (i.e. profits that the business pays tax on twice).

You’ll also need to use the long version if you received self-isolation support payments from the government due to coronavirus and treated these as part of your business’s income. These payments are subject to NI but not to tax, and there is a box you need to use to adjust your profits which can only be found on the long version of the Self-employment page.

If you want to choose to fill in the long version, you can switch to this at the top of the Self-employment page of your tax return in FreeAgent.

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An overview of the short version of the Self-employment page in FreeAgent

Select ‘Yes’ to ‘Do you need to fill out the Self Employment section?’ and enter the amounts of any income and costs for the self-employed business. Remember that this page relates only to your self-employed business. Do not include anything on this page that relates to the limited company of which you’re a director.

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Business details

Enter a description of your self-employed business in box 1 of the ‘Business details’ section, the postcode of your business address in box 2 and select whether any of your business’s details have changed in the last 12 months.

In box 8, select whether you have used the cash basis in preparing your accounts. If you used the cash basis, select ‘Yes’. If you used the accruals basis, select ‘No’.

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Income

Box 9 is for turnover - enter the income your self-employed business has earned during the year. This figure should exclude bank interest, which you need to enter on the Main Return page.

Use box 10 to enter any other income your business received during the tax year, including any coronavirus support payments which you received and were entitled to receive. If you received more in coronavirus support payments than you were entitled to and haven’t yet told HMRC, you’ll need to report this on your Main Return page. This is the figure you need to pay back in full to HMRC.

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Amounts entered in box 10 are included in your profit for tax calculation.

Costs

On the short version of the Self-employment page, only enter costs that are 'allowable' for tax (i.e. costs that can be used to reduce the amount of profit that's subject to tax) in boxes 11-19.

Box 20 is the sum of boxes 11-19.

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Capital allowances

Enter any capital allowances into boxes 23-26. There are complex rules governing what you can claim for different assets, which are based on information that isn’t recorded in FreeAgent. If you're not sure what figure you can claim, please ask your accountant.

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Class 2 National Insurance

Up until 6th April 2024, if your self-employed profits are over the Lower Profits Limit, you have to pay Class 2 National Insurance contributions (NICs). Class 2 NICs are usually a flat rate per contribution week or partial contribution week that you're self-employed (unless you're a share fisherman).

A contribution week is defined as a period of seven days starting from a Sunday (just after midnight) to the following Saturday (just before midnight). For example, if you started self-employment on Saturday 11th February 2023, you would be liable for Class 2 NICs from Sunday 5th February 2023. If you began self-employment on Sunday 12th February 2023 however, you would be liable for Class 2 NICs from that Sunday.

Once your Class 2 NIC liability has been established, it will continue for as long as you are ordinarily self-employed. This means that you will remain liable for Class 2 NICs during holiday weeks, weeks when you do not do any self-employed work and weeks when you do not earn anything from self-employment.

If you cease self-employment, your liability to pay Class 2 NICs will end on the Saturday of the week in which you ceased to be self-employed. For example, if you gave up self-employment on Thursday 9th March 2023, your liability would have ended on Saturday 11th March 2023 and you would still have had to pay Class 2 NICs for that whole week.

If your self-employment profits are over the Lower Profits Limit, FreeAgent will automatically calculate your Class 2 NI liability for you based on the number of contribution weeks in the tax year in accordance with HMRC guidance, as shown below. However, you can override this amount if you know it to be incorrect e.g. if you started self-employment mid-year.

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If your self-employment profits are below the Small Profits Threshold, you can still volunteer to pay Class 2 NICs. If you want to do this, select ‘Yes’ in the section shown above. Please note that from 6th April 2024, only sole traders with profits below the Small Profits Threshold will be able to volunteer to pay Class 2 NICs.

Class 4 National Insurance exemption

Most self-employed individuals have to pay Class 4 National Insurance contributions (NICs), but if you're under 16, over state pension age, or not resident in the UK for tax purposes as at the start of the tax year in question, you're exempt from paying Class 4 NICs. If this applies to you, select 'Yes' to question 37.

You may sometimes need to adjust the profits on which you're paying Class 4 NICs (e.g. if you've used a loss to claim back some tax and the loss is still available) to save you Class 4 National Insurance). Check with your accountant to find out whether this applies to you.

CIS deductions

If you're a subcontractor in the construction industry, enter the tax that was taken off your earnings by your contractors into box 38. HMRC takes this tax into account when working out how much tax you should pay this year.

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