If you're a sole trader, member of a partnership or a company director you'll need to understand a little more about how taxations works

Each of the following points and subpoints are designed to help you understand what you need to do in regards to taxation compliance. If you can go down this list and not find any point you are either non-compliant with or uncertain how to comply you are on the right track!

• Make certain you register as self-employed within three months of working or starting to trade.

  • Failure to do so may result in a penalty of up to £100, plus interest on any taxes due.

• If you’re planning on running your business from home, you may have to pay business rates for the part of your home that you use for business purposes, depending on whether or not you use that part for domestic purposes as well.

• If you’re working from home, do you need planning permission? If you propose to make any changes to your house for business purposes contact the planning department of your local authority.

• Anyone who becomes self-employed must register for income tax and national insurance contributions with HM Revenue & Customs (HMRC). There are exceptions, check the HMRC website for a guide on self-assessment.

• This can be done either online, by phone or by post, however it is far quicker and more convenient to sign-up online.

• Upon registration, you’ll need to provide the following information:

  • Name

  • Address

  • National insurance number

  • Date of birth

  • Telephone number

  • Email address

  • The nature of your business

  • Start date of self-employment

  • Business address

  • Business telephone number

  • Your Unique Tax Reference (UTR) - only if you were within self-assessment previously

  • The business’ UTR – if you’re joining an existing partnership

  • (If relevant) The full name and date of birth of any business partners

     

• As a self-employed sole trader, you’ll have to complete a self assessment tax return to HMRC.

  • This involves filling in a tax return form (paper or online) in which you inform HMRC of your income and capital gains, or in which you may claim tax allowances or reliefs.

    
    

• (Usually) HMRC will send you your self assessment tax return in April.

  • If yours doesn’t arrive by the end of April, contact your tax office.

  • If this is the first tax return you’ve completed, you’ll need to fill in a self assessment registration form first.

    • This involves completing a CWF1 form to inform HMRC about your business, and this will also register you for self assessment. If you’re not self-employed, you’ll need to complete an SA1 form.

    • Once this is done, HMRC will set up tax records for you and will send you a Unique Taxpayer Reference (UTR).

       

• If you owe any money by the end of the tax year (April), you must pay that amount by January 31 the following year.

• The payment deadline is the same whether you file online or on paper. You will need to pay one or both of the following:

  • The balancing payment (the balance of tax you owe for the previous year)

  • The first of two ‘payments on account’ (advance payments for the current tax year)

    • If you’re asked to make payments on account, your deadline for making your second payment is July 31.

Read more: Maintaining Records for Tax Purposes, Introduction To Recordkeeping

News: Small Businesses Face Fines Over Paperwork

See also the Paper Mountain Solutions Blog for lots of discussions about taxation.

Paper Mountain Solutions offer a number of financial solutions to assist your business. Get in touch with the team for a free quotation.