When should i inform HMRC about setting up a new business?

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setting up a business

This is the question that is mostly asked by individuals that start a new business in the UK.

If you set up as a limited company, your details would be passed to HMRC  during registration.

The issues discussed in this blog relate to those that want to set up their business as a sole trader.

setting up a business

Why do you have to inform HMRC of your new business?

The reason why you would have to inform them of your trade is that the profits from trade are a taxable income.

You do not need to inform them if your trading income for the whole year is less than £1000.

This is useful for sole traders that do business as a side hustle and earn little money.

However, if your trading income is more than £1000 you would have to register with HMRC.

You will have to register with the HMRC six months after the end of the tax year that you started to trade.

Example of when to inform the HMRC.

For example, let say that Kate started selling cakes to the community.

Kate started this venture on the 1st of January 2020.

So she started trading within the tax year 2019/20 which ends on 5th of April 2020.

She would have to inform HMRC by the 5th of Oct 2020.

setting up a business

How can you register as a sole trader?

You can either register online by visiting

Also, you can call the HMRC on 0300200300.

Information that you would require for registration.

Mostly the HMRC would ask for personal details.

Details such as full name, date of birth, address when you started living in the address, your national insurance, phone number, email address e.tc.

If you are registering online you will be required to open a government gateway account and they will have to confirm your identity.

Therefore, it might be handy to have your P60 or British passport, information about tax credits received.

Don’t worry if you don’t have any of the items mention above, they would have to ask you a few security questions to confirm your identity.

 

What happens after registration?

The HMRC would send you a letter confirming your registration.

If you do not receive this letter within 4 weeks after registration, it might be a good idea to call them that you haven’t received the letter.

The reason is that the letter will contain information that is important for you trading as a sole trader

This information is referred to as your unique tax reference number, (its 10 digits).

You cannot submit your returns or deal with HMRC without this number, so it’s important it is kept safe.

What happens if you stop trading or change your mind?

No matter what the situation is you will still have to inform HMRC of the changes in circumstance.

If your trading income is less than £1000 (money received before deducting expense) you will not need to submit a Self-assessment return.

But you will need to call them and inform them of your situation.

If your trading income is more than £1000, you might have to submit returns depending on your other income you have earned in the tax year.

If you do not inform them, they will automatically expect a tax return from you and this could cause unplanned debt especially if you try to deal with it when it is out of time.

Now that I have set up my business what do I have to?

Most individuals usually get an accountant or bookkeeper to support them immediately, this is a good practice as it saves them from making mistakes.

However, if this is not the case, record keeping is very important.

Have software that helps you to have real-time bank feeds.

Take pictures of your receipts and invoices using either phone or an app.

What this does is that it keeps you in control of your business and helps to make timely decisions.

Conclusion

Thanks for reading our blog,  I hope the information here has been helpful. If you would like to watch a video on setting up a business in the Uk, kindly click below.

If you would like our support in this new adventure, kindly contact us, our team would be happy to support you.