How to register for Business Taxes

Time to make it official!

Dealing with taxes might sound daunting, but it’s actually a straightforward and essential step in setting up your business. Registering with HM Revenue & Customs (HMRC) means you’re officially telling the government you’re in business. It ensures you pay the right amount of tax at the right time, keeping everything above board from day one.

Which tax do I need to register for?

The type of tax you register for depends on the legal structure you've chosen for your business. The two most common options for new businesses are Self Assessment for sole traders and Corporation Tax for limited companies.

If you're a Sole Trader...

You need to register for Self Assessment. This means you'll report your business's income and expenses to HMRC once a year through a tax return. You then pay Income Tax on the profits your business makes. It’s important to remember that as a sole trader, the law doesn't see a difference between you and your business.

If you've set up a Limited Company...

Your company is a separate legal entity, so it needs to be registered for Corporation Tax. The company will pay this tax on its profits. As a director, you will likely pay yourself a salary or dividends, and you'll still need to complete a personal Self Assessment tax return to declare this income.

How to get registered

The process for registering is managed online through the GOV.UK website. It’s designed to be user-friendly, so just follow the steps carefully.

1. For Self Assessment (Sole Traders): You must register by 5th October in your business's second tax year. Head to GOV.UK and search for 'register for Self Assessment'. You’ll need your National Insurance number to get started.
2. For Corporation Tax (Limited Companies): You should register with HMRC for Corporation Tax within 3 months of starting to do business. This includes activities like buying, selling, or advertising. Often, you can register for Corporation Tax at the same time you register your company with Companies House.

Once you've registered, HMRC will send you a Unique Taxpayer Reference (UTR) number. Keep this safe – you'll need it for all your future dealings with them!

Do I need to register for VAT?

VAT (Value Added Tax) is a tax applied to most goods and services. You don't need to worry about it straight away, but you need to know when it applies.

You must register for VAT if your VAT-taxable turnover for the last 12 months was over the government threshold (which is £90,000 as of April 2024), or you expect it to go over that threshold in the next 30 days. Always check the GOV.UK website for the current threshold.

Your 'VAT-taxable turnover' is the total value of everything you sell that isn't VAT-exempt.

Some businesses choose to register for VAT voluntarily, even if their turnover is below the threshold. This can be beneficial if you buy a lot of VAT-rated items for your business, as you can reclaim the VAT you've paid. However, it also means you have to charge your customers VAT and submit regular VAT returns, so think carefully before deciding.

Our Top Tips for Tax Success

• Keep good records from the start: This is the golden rule. Use a spreadsheet or accounting software to track every penny that comes in and goes out. It will make filling in your tax return a thousand times easier.
• Open a separate bank account: Even if you're a sole trader, having a separate bank account for your business makes it much simpler to track your business finances.
• Put money aside for your tax bill: A great habit to get into is to set aside a percentage (e.g., 25-30%) of every payment you receive into a separate savings account. This way, you won't have a panic when the tax bill arrives.
• Don't miss deadlines: HMRC has strict deadlines for registration and filing returns. Put them in your calendar to avoid automatic penalties.

Getting registered for tax is a massive step towards running a proper, professional business. Once it's done, you can get back to focusing on what you do best!