Starting Your Business Journey: When to Register with HMRC & Understand UK Tax

Embarking on a new business venture is an exciting step. Whether you're launching an online store, a consulting practice, or a creative project, understanding when you need to engage with HMRC regarding registration and tax obligations is crucial. Let's break down the key stages.

When Do You Need to Register Your Business with HMRC?

Think of this as laying the essential groundwork for your business.

If you’re self-employed in the UK, you must register as a sole trader with HMRC when your earnings from self-employment exceed £1,000 in a tax year (April 6th to April 5th). This applies to anyone selling products, offering services, or running a side business. Once you exceed this threshold, it's important to understand the registration timelines. You can start the registration process on the HMRC website.

Even if you earn less than £1,000, it’s a good idea to keep records of income and expenses, as you may need them when your business grows.

How to Register Your Business with HMRC

Head to the HMRC website and sign up for Self Assessment.

Receive your Unique Taxpayer Reference (UTR). This is your official business identifier for tax purposes.

Keep track of income and expenses; this will make tax filing much easier down the line.

Thinking of scaling up? If your business is growing, you might set up a limited company instead of staying as a sole trader. Remember that the registration process for a limited company is different and is done through Companies House when the company is formed, not tied to the £1,000 earnings threshold for self-employment. Setting up a limited company comes with different tax and liability benefits.

The October 5th Registration Deadline for the Self-Employed

It's crucial to be aware of a specific deadline for registering for Self Assessment if you're new to self-employment.

The October 5th Deadline: This specific date, October 5th, following the end of the tax year in which you became self-employed (and earned over £1,000 for the first time), is the deadline for notifying HMRC that you need to complete a tax return.

Example: If you started your self-employment and earned over £1,000 during the tax year running from April 6th, 2024, to April 5th, 2025, you would need to register for Self Assessment by 5th October 2025, if you hadn't registered before.

Missing this deadline can result in penalties from HMRC, so it's important to register promptly once you meet the income criteria.

When Do You Need to Submit a Tax Return?

Once registered, you’ll need to submit a Self Assessment tax return every year. This is how you report your earnings and expenses to HMRC.

Key Tax Dates in the UK

6th April - Start of the new tax year

5th April – End of the tax year

31st January – Deadline to submit your online tax return and pay any tax owed

Your Self Assessment tax return must include:

• Your total self-employment income

• Any allowable business expenses

• Your profit and tax owed

Remember, you only pay tax on your profits, not total income.

When Do You Start Paying Tax?

Understanding when tax payments begin is a key part of managing your business finances.

What Taxes Do You Need to Pay?

Income Tax – Payable when profits exceed £12,570 per year (the personal allowance).

National Insurance Contributions (NICs) – Start at £6,725 in profits.

VAT – If your business turnover exceeds £90,000, you must register for Value Added Tax (VAT).

Corporation Tax – If you form a limited company, you’ll pay Corporation Tax instead of personal tax.

If your earnings increase, you may be required to make Payments on Account, meaning paying tax in advance for next year’s bill.

Keeping Good Records – Essential for Business Success!

Maintaining thorough records of your income, expenses, invoices, and tax deadlines is vital for smooth business operations.

Whether you use accounting software like QuickBooks, FreeAgent, or Xero, or prefer a trusty spreadsheet, make sure to:

• Log all income and expenses

• Keep receipts for business costs

• Track tax deadlines

Final Thoughts – Setting Your Business Up for Success!

Starting and running a business is exciting, and knowing when to register with HMRC and when to start paying tax is a fundamental aspect of building a sustainable venture.

By registering on time, keeping track of earnings, and staying on top of tax deadlines, you’ll ensure your business operates smoothly and remains compliant.

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