You are self-employed, you have started working for yourself, what do you need to do to now? How to register for tax.

When to register for tax

You are required to register with HM Revenue & Customs (HMRC) if you receive self-employment income of £1,000 or more in a tax year.

  • The £1,000 total is before you have deducted any tax-allowable expenses.
  • A tax year currently runs from 6 April to 5 April.

You are also required to register if you become a partner in a business.

You will also need to register if you are:

Other income, tax claims & tax registration

In other cases, the rule is (very broadly) that you will need to register for tax if you:

(see HMRC SAM100060 for a detailed list) or,

if you have untaxed Capital Gains, see Reporting Capital Gains Tax.

Time limits

The deadline for registering for Self Assessment is 5 October following the end of the tax year.

For example:

  • If you started a business on 19 August 2021, this falls into the 2021-22 tax year, which runs from 6 April 2021 to 5 April 2022.
  • You must register with HMRC by 5 October 2022. 
  • If you file online, your 2021-22 tax return will be due by 31 January 2023. 
  • Top Tip: it is best to register as soon as possible so that you do not forget. You will be charged a penalty if you register late.

This obligation to notify HMRC of chargeability to Income Tax also applies to Capital Gains Tax and other income.

You must also notify HMRC if, during the tax year you have:

  • Made a capital gain over your annual exemption (£12,300 for 2021-22). 
  • Employment income that is not taxed under PAYE. 
  • Dividend income and further tax to pay on that income.
  • Any other untaxed income or are liable to tax at higher rates.

You must also notify HMRC if you have to report that you are subject to the High-Income Child Benefit Charge

When do I need to file a Self Assessment Tax return?

If you have registered as being self-employed, HMRC will send you a notice to file a tax return each year.

  • If HMRC fail to send you a notice to file a return and you have no taxable income, you are not required to file a return.

Having registered for tax you may also need to submit a return:

  • To report CGT see How to report CGT.
  • To report other untaxed income.
  • To claim a refund or make a claim for Income Tax relief.

If you are a company director, in December 2018 HMRC amended its guidance to say that where all of a director’s income is taxed at source and there is no further tax to pay, they do not have to register for SA and file a Self Assessment return. This applies specifically to directors, see Do I need to file a tax return?

How to register for tax?

To register for tax you will need ensure that you have the following information and documentation:

  • Your National Insurance number.
  • At least two forms of photo identity, e.g. passport, driving licence.
  • Proof of address.

Steps

1. Navigate to HMRC’s site which will take you through the process of registration and setting up a ‘Business Tax Account’.

HMRC’s new registration page:

https://www.gov.uk/register-for-self-assessment/self-employed

2. Enter your details and carefully note down the account number that is given during the process. You will need this to login again later.

3. Upload your details to take you through the ID checks.

4. Once your details are entered, you will then be given a Unique Taxpayer Reference (UTR).

5. An Activation code will be sent to you by post, generally 7-14 days later.

6. Activate your account by login with your details you can access your Business Tax Account.

7. Once you have a UTR and a Business Tax Account you can file your tax return online and check your tax details online.

What Records do I need to keep?

  • You must keep records of both your business income and expenses.
  • If your business is complicated or doing well, it's advised to set up a separate business bank account.

See Recordkeeping & tax: What, how and until when?

Do I need to use software for bookkeeping?

  • If you are likely to be turning over more than £10,000 per year that it will be mandatory to use software for bookkeeping and reporting from April 2023 under Making Tax Digital (MTD) reporting for Income Tax.

See Making Tax Digital

What accounting period do I use to prepare accounts for tax?

  • Decide on a date to prepare your accounts to. Most businesses choose 31 March or 5 April. Both dates are treated as being the end of the tax year. 
  • If you have rental income, the year-end for that is always 5 April.
  • The government is considering changing the rules so everyone has a 31 March year-end.
  • See Accounting periods and tax basis periods

When do I have to pay tax?

  • Tax is paid on 31 January following the end of the last year, with an interim payment made on the following 31 July.
  • The actual amounts due will depend on your profit levels. 
  • You also have to pay Class 2 National Insurance, if your profits are more than £6,515 per year, and Class 4 National Insurance if your income is more than £9,568.

Make sure you put money aside to pay your Income Tax and National Insurance bill. See How to work out your tax if you are self-employed

Expanding a new business

  • Will you take on any employees? You might need to register with HMRC as an employer and run a payroll.
  • If you are likely to have a turnover of £85,000 or more in a 12 month period, you will need to consider whether to Register for VAT? Should you Register voluntarily

See our: New business: Sole trader compliance checklist

WARNING

Be very careful about being caught by fake websites which pretend to be HMRC.

HMRC will never charge you to register for tax, file a tax return or claim a tax refund or overpayment.

HMRC will never send you an email to say that you have a tax refund.

You can find details of tax refunds and tax due on your Business Tax Account, once it is set up.

 


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