Getting started in business? This checklist covers the key steps in getting started for tax. Noting that we have many more guides covering each aspect on this webservice, see the Main menu.

The items in this check list need to be considered 'in the round'.

  • Don't start a new business until you have worked out a business plan
  • The secret is to never stop planning and to keep updating your business plan.

The list, links to guides are below. 

  • Starting work, a new business or a 'gig' job: will the tax rules treat you as employed or self employed?
  • What is the difference between being self employed and employed?
  • If you are self employed and running your own business, which 'trading style' or 'trading vehicle' is best? A sole trader, in partnership or running a company?
  • Looking at tax: is there any difference between different trading styles and vehicles?
  • What are the legal requirements to set up in your choice of trading vehicle?
  • When and how do you notify HMRC?
  • Do you need to notify anyone else?
  • Bookkeeping and accounting requirements
  • What about VAT?
  • What about staff and employees?
  • Essential Practicalities: your business plan, name and branding, insurances, legals and promotion.

Starting work or starting a business?
You might not be thinking you are starting a business: your employer may decide that you are self employed alternatively the tax rules may deem that you are someone's employee and not self employed after all.

See

Starting a business: Which trading style or vehicle is going to be most suitable for me?

See:


Tax: which structure is likely to save the most tax?

Basic formalities and legal agreements

Partnerships

  • There are different types of partnership in UK law each covered by their respective partnership acts setting out various defaults.
  • It is advisable to draw up an agreement to suit the nature of the partnership.
  • We don't provide a template at this time because partnerships vary so greatly in size and activities that we don't think that a "one size fits all" approach is ever suitable.

Companies

  • If you chose to trade though a company you need to form a new company with Companies House.
  • Companies can be unlimited, limited by guarantee or limited by shares.
  • If you are running a non-for profit organisation then you may consider being limited by guarantee.
  • The majority of trading companies are limited by shares.
    • Before you get started you need to plan your share classes, consider whether to modify the Articles of Association and/or draw up a shareholders agreement. You can also make amendments following formation. 
  • See How to form a company

Company share capital and shareholders


Registration with HM Revenue & Customs

If you are in business, whether as:

  • a self employed individual,
  • an individual in partnership or
  • a company.

You are required to open an account on the Government Gateway www.gov.uk and register with HMRC.

Individuals

  • Under self-assessment you must notify HMRC if you have taxable income or chargeable capital gains in a tax year for either income tax or corporation tax.
  • When you start your business. select a suitable accounting basis period when you register.

Employers (individuals, partnerships or companies)

  • Separate online notification and registration with HMRC is required if you take on workers and employees.
  • You must assess any worker's employment status.
  • Certain categories of workers are automatically deemed to be employees for tax purposes (this does not alway confer any employment rights on them)
  • You must pay employees via a payroll and deduct PAYE & Real Time Information reporting (RTI)
  • If you trade via a company and you are paying yourself a salary or any benefits, or if you trade via any type of business entity and you take on employees or pay your directors, or you make available employment type benefits you will need to set up a PAYE scheme.
  • See RTI for employers.

Construction industry Employers: Construction Industry Scheme (CIS) 

  • If you are a contractor you must operate the CIS on your workers unless they are employees or their work is outside the CIS scheme.
  • If you are a sub-contractor you must register with HMRC otherwise you will have tax deducted from your income at 30%.
  • See CIS: Contractors and Subcontractors.

VAT

You must register for VAT if:

If you don't have to register for VAT you can choose to do so if you will be making taxable supplies.

See VAT: Starting in business

 

Accounting for tax and record keeping: sole traders and partnerships

Since 6 April 2013, under measures which are supposed to simplify accounting for tax, small unincorporated businesses may elect to use cash basis accounting, and/or a new system of fixed rate expenses.

  • Neither method is in practice simple to use, because each has several drawbacks and so you need to consider what is going to be most suitable for you with your adviser. It may be advantageous to keep an open mind about which system to use until trading is underway.
  • See Accounting: Simpler Income tax (cash basis) / fixed expenses

Accounting: companies

  • Companies file their accounts with Companies House, in different formats according to their size.
  • Small companies have the option of filing abbreviated accounts or micro-entity accounts.
  • Company accounts are prepared according to generally accepted accounting practice (GAAP).
  • See UK GAAP & FRS 

 Miscellaneous FAQs

Tax Planning

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