LP10 letter

What is an LP10 Letter and How to Get it?

30/10/2023Sole Trader

Are you looking for more information on the LP10 or the Lorimer letter? Read this blog till the end. The LP10 letter was introduced first in 1993 as a way to allow freelancers to be considered self-employed. It encompasses many benefits to the holder by reducing the tax. But what exactly is it, and how do you get one? Join us as we explore the intricacies of an LP10 letter. We will start by describing it clearly to the audience. Then, you will be given the eligibility criteria for an LP10 letter, followed by who can apply for it. Lastly, you will be given a short guide to help you apply for an LP10 letter.   If you need more information, visit CruseBurke!   What is an LP10 Letter? An LP10 letter is a document provided by the HMRC to a person’s employer. The letter states that you should be treated as a self-employed person and therefore not be taxed under the PAYE system. The letter ensures that a person who is self-employed is taxed appropriately instead of having to file a tax return at the end of each year. This letter is provided to only short-term employees who do not want to fall under the PAYE system.   What is the PAYE system? The pay-as-you-earn, or PAYE, system allows the employer to deduct taxes from the salary of their employee. In addition to this, employers can also deduct the National Insurance Contributions (NICs). This amount is deducted on behalf of HMRC and paid to the regulatory body.   So Why is There a Need for a Lorimer Letter? If you are a freelancer or a person who is self-employed, you probably file your taxes yourself. Therefore, when an employer deducts your salary for the tax and NIC on behalf of the HMRC, you are overpaying the tax. Not only are you paying your tax as a self-employed individual but also as an employee to the person who you work for on a short-term basis. Although you can apply for tax rebates, it can be frustrating as they are paid by the end of the tax year. That is why you need an LP10 letter.   Are You Eligible for an LP10 Letter? A Lerimor letter is provided to those individuals who are freelancers and work on short-term contracts. This is to ensure that they are not overpaying their taxes. In addition, to apply for the letter, you must also fulfil the following requirements: Be a self-employed sole trader You must have an NIC and a UTR number Evidence of multiple short-term employment contracts The work you are applying for must be for less than 10 days Proof that you are in control of your work   Who Can Apply for an LP10 Letter? Although the letter is mostly associated with the film and television industry, it is applicable to multiple sectors. This includes arts, literature, finance, education, healthcare, IT, and others. Here are some of the cases to help you clarify: If you are a writer hired to write a single article for a newspaper. If you are a plumber hired to make fixes in a client’s home. If you are a musician hired to play at a wedding.   How to Apply Yourself! If you are looking to apply for an LP10 letter, make sure that you are eligible. Although we have given the eligibility criteria above, it is recommended to study the rules thoroughly. To start the procedure, contact HMRC or visit their website. You will be required to show a 12-month employment history. Once you get the letter, it will be applicable for 3 years. After the end of the period, you will need to apply for it again.   If you are looking for a reliable accounting partner as a self-employed person, contact us!   A Quick Wrap-Up An LP10 letter is provided to those self-employed sole traders who work on short-term contracts. The letter is provided by the HMRC to the employer who employs a worker for less than 10 days. This letter asserts that you should not be charged under the PAYE system and provided with a gross salary if you are a worker. The letter ensures that freelancers who work on short-term contracts get their salary on time without any tax deductions as they file their taxes separately. This ensures a smooth tax system instead of applying for tax rebates at the end of the year.   We at CruseBurke understand that the UK’s tax structure is complicated and therefore provide you with the best tax advisory and accounting services in the UK. Click here to get an instant quote.

Read more