You are self-employed, you have started working for yourself, what do you need to do now? How to register for tax. When do you pay tax? What records do you keep?
This is a freeview 'At a glance' guide.
At a glance
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:
- Within the Construction Industry Scheme (CIS).
- Want to pay voluntary Class 2 National Insurance Contributions.
- Wish to preserve your self-employment record.
- Wish to claim certain benefits based on self-employment.
Other income, tax claims & tax registration
In other cases, the rule is (very broadly) that you will need to register for tax if you:
- Have untaxed income of £2,500 or more.
- Have Income from property that exceeds £10,000 gross, irrespective of the amount of expenses to be set off, or where the net amount is more than £2,500.
- Have non-resident income to report.
- Need to claim an Income Tax relief, e.g. an Investment Relief.
- Need to report the High-Income Child Benefit Charge (HICBC).
- Have untaxed Capital Gains, see Reporting Capital Gains Tax.
See HMRC SAM100060 for a detailed list.
The deadline for registering for Self Assessment is 5 October following the end of the tax year.
- If you started a business on 19 August 2022, this falls into the 2022-23 tax year, which runs from 6 April 2022 to 5 April 2023.
- You must register with HMRC by 5 October 2023.
- Your 2022-23 tax return will be due by 31 January 2024.
- 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 (CGT) and other income.
You must also notify HMRC if, during the tax year you have:
- Made a capital gain that exceeds your CGT annual exemption (£6,000 for 2023-24, £12,300 for 2022-23).
- A 60-day return is required if you are disposing of residential property (unless there is no tax due) or are a non-UK resident disposing of UK property, see Reporting CGT.
- 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 fails 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 Self Assessment and file a tax 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 to 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.
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:
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.
Do I need to use software for bookkeeping?
- If you are likely to be turning over more than £50,000 per year that it will be mandatory to use software for bookkeeping and reporting from April 2026 under Making Tax Digital (MTD) reporting for Income Tax. If your turnover will be more than £30,000 per year you will have to report under MTD from April 2027.
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 changing the rules so everyone has a 5 April year-end in 2023: this means that it is not worth choosing a year-end other than 31 March or 5 April.
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 £6,725 per year, and Class 4 National Insurance if your income is more than £12,570 (check the National Insurance rates as the thresholds changed mid-way through 2022-23 and rates reduced by 1.25% from 6 November 2022).
- If HMRC does not issue you with a Unique Taxpayer Reference in time to pay your tax liability, you can still make a payment using your National Insurance number. This may prevent Late payment penalties and interest from being charged.
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?
Be very careful about being caught by phishing (fake) websites that 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.
HMRC's confirmed url for registration is https://www.gov.uk/register-for-self-assessment/self-employed