This section gives information regarding the most common tax related issues affecting residents of the Isle of Man who are self employed.
Self-employment is when a person sets up in business for themselves rather than working for someone else, they benefit from the profits of their business rather than being paid a regular wage by someone else.
Anyone can become self-employed and if this applies to you then you are responsible for making payments of income tax, class 2 and class 4 national insurance contributions for yourself and you must make provision to pay these when your assessment or payment on account becomes due and payable. This is in addition to your responsibilities to pay any income tax and national insurance payments due in respect of your employees or any deductions necessary under the construction industry subcontractor scheme.
You can set up in business as a sole trader (you by yourself), or in partnership with one or more other people.
When you first decide to become self-employed, there are several things you need to do.
It is a good idea to open a bank account for your business, in order to keep it separate from your own personal account. Your bank will be able to advise you on the best options for a business account.
You may also consider hiring a book keeper or an accountant. A qualified professional will be able to advise you on financial matters generally, as well as organising your National Insurance and Income Tax payments, and VAT where necessary.
You will need to inform the Income Tax Division of your intention to become self-employed. There may be several things you need to do.
- Call or visit the Income Tax Division to discuss and agree your employment status. This should be done in all cases of self-employment - whether full time, part time or just in your spare time
- If you have given up your previous employment, you should send the form T21 which should be given to you by your last employer to the Income Tax Division
- If you intend to employ staff or construction industry subcontractors you must register with the Income Tax Division, and arrange to deduct tax and Class 1 National Insurance from their wages
You should also contact the Income Tax Division in connection with your Class 2 National Insurance payments. You should also contact the Isle of Man Customs and Excise Division in order to register for VAT purposes.
The Income Tax Division will normally liaise with any advisor you authorise, rather than directly with you, but you continue to be responsible for the submission of your return form and accounts.
If you decide to trade under a business name, you need to register the name you have chosen with the General Registry.
Employed or self-employed?
If you are unsure whether you are employed or self-employed, please read the statements below:
- Do you have the final say in how your business is run?
- Do you risk your own money in the business?
- Are you responsible for meeting the losses as well as taking the profits?
- Are you free to hire other people, on your own terms, to complete the work you have taken on? Do you pay them out of your own pocket?
- Do you provide the major items of equipment you need to do your job, not just smaller tools which many employees will provide for themselves?
If you answer yes to these statements you are usually self-employed. If you have to work a set numbers of hours, at a premises decided by someone else, earning wages determined by someone else, then you are probably an employee. It is your employer’s responsibility to deduct ITIP and national insurance contributions from your pay.
You can be employed and self-employed at the same time, for example you could have a full time job working in a shop and be self employed in your spare time doing mobile beauty treatment to make some extra money.
If you answer yes to some of the questions above and no to others, please contact the Income Tax Division to discuss your circumstances.
If you are unable to find the information or details that you require, please contact General Enquiries on +44 1624 685400.