Navigating business obligations: registering with HMRC

Navigating business obligations: registering with HMRC

by | Apr 17, 2024 | Latest News

If you’re at the beginning of an exciting new business endeavour, there is one key step to take before it’s well and truly underway – registering with HMRC. Every business in the UK must be registered with HMRC; it’s a fundamental step which lays the groundwork for financial compliance and legal legitimacy. 

At Fiander Tovell, we are dedicated to assisting businesses at every stage of their journey, from inception to triumph. While registering with HMRC is relatively simple, there are some key considerations that can impact your business in the long run. That’s why our team is here to guide you through the process seamlessly.  

So, are you ready to make your business official? Learn how to register your new business with our comprehensive guide!

 

1. Choosing your business structure  

If you are one of our avid readers, you may have seen our blog about trading options,which covers the different business structures available to start-ups. Whether you chose to operate as a sole trader, partnership or limited company, it’s important to be aware of what each structure would mean for your operations:

 

Sole trader 

An individual operates as the sole owner and is personally responsible for all aspects of the business, including finances and liabilities.

 

Partnership  

A business structure where two or more individuals share ownership and responsibility for the business, including profits, losses, and liabilities.

 

Limited Company  

A business structure where the company is a distinct legal entity from its owners (shareholders), offering limited liability protection and the potential for growth through the sale of shares. A full rundown on setting up a Limited Company can be found here.
  

2. Registering online  

Once you have decided on a business structure, you’ll have to register your business online. HMRC offers an online registration portal designed to streamline the process. You will need to provide information such as your personal details, business name, address, nature of business activities, and relevant financial details.  

When registered, HMRC will issue you with a Unique Taxpayer Reference (UTR) and may allocate other reference numbers depending on your business structure.   

Once you’ve set up your business tax account, you can use it to: 


3. Ongoing compliance  

Once registered with HMRC, it’s crucial to stay compliant with regulations by filling accurate tax returns on time, making payments promptly, and keeping a detailed record of all business transactions. Failure to comply can result in penalties, fines, or even legal action from HMRC, which can have severe consequences for your business’s reputation and financial stability.  

Our experts are fully aware of compliance with HMRC regulations. With our comprehensive understanding of tax laws and diligent approach, we ensure that your business stays on track with accurate tax returns, timely payments, and meticulous record-keeping. This is why we outsource our bookkeeping services to provide businesses with skilled professionals that can streamline the entire process to avoid costly errors.  

There, you should now be fully registered with HMRC! However, our help doesn’t stop here. We have a wealth of articles covering the different aspects of business growth along with the services we provide to ease your stress. Why not take a look at the next step of starting up your business: ‘Sustaining your start-up‘  

If you want more information on our services, or further guidance, don’t hesitate to contact our Commercial Client Director, Fabrice Legris: fabrice.legris@fiandertovell.co.uk  

What does the so-called ‘Side Hustle Tax’ mean for you?

What does the so-called ‘Side Hustle Tax’ mean for you?

by | Jan 22, 2024 | Personal Tax

Earlier this month, HMRC introduced new rules for online marketplaces, requiring them to collect and report seller information and income to HMRC. Inevitably, this caused concerns amongst not only individuals with side hustles, but those who resell their ‘pre-loved’ items on platforms such as eBay, Depop and Vinted.  

Fear not though, as little has actually changed. If you have a second income stream (side hustle), your Self Assessment tax obligations remain the same. Similarly the rules regarding reselling second hand items have not changed either.  

However, there are some details that we feel side hustlers should be made aware of in order to avoid any tax dramas. In turn, it will be a good opportunity to refresh yourself on any tax obligations for a side hustle. So, stick with us while we break down the intricacies of tax for side hustlers.   

What is a Side Hustle?

A side-hustle is something you may do in your free time to earn some extra cash, for example selling second-hand vintage clothing. Whatever it may be, it is not your full-time job and just something you like to do part-time! 

The difference, however, is that the money you make from a side hustle is taxed differently to your full-time income from employment.  

Do I have to pay tax on my Side Hustle?

Well, this depends on what you are earning.  

Any earnings of less than £1000 within the tax year from your side hustle is not considered taxable income and you are liberated from the worries of Self-Assessment.  That’s £1000 of sales, not profit: if you spent £1000 on items that you then sell for £1500, that counts as £1500 of sales even though you’re only £500 better off. 

Also, a side hustle is something you’re doing to earn cash.  If you sell something on Vinted that you bought to wear then you’re not earning money, you’re just getting back a bit of what you paid for it. Therefore, if you’re simply reselling your unwanted items, then it’s unlikely that you will  have any ‘earnings’ to pay tax on. 

Unfortunately, if you are earning more than £1000 in your spare time, you will have to declare it. But don’t worry, we have you covered with a step-by-step guide on how to pay it.  

Remember that the platform you sell on will have told HMRC how much you’ve sold, so if you’re over the £1000 limit they’ll be expecting you to be in touch. 

How do I pay my Side Hustle Tax?

If you earn over £1000, you will need to file a Self Assessment tax return to declare your extra income.   

Income tax works on ‘tax years’ which runs from 6th April one year to 5th April the next (for complicated reasons involving Julius Caesar and the Pope – don’t ask!).  You need to keep records for each tax year, and if you need to do a tax return you have to notify HMRC by 5th October after the tax year ends (only for the first year). 

If you are registering for the first time, you will be required to follow the five step process below:

If you are registering for the first time, you will be required to follow the five step process below:

  1. Start by choosing your own business structure. You will normally be a sole-trader, unless you’ve set up a limited company or other business structure. These can have different advantages and disadvantages, so if you’re looking to grow your side hustle into a bigger business we’d advise you to do some research before deciding which best suits you.  
  2. Next, you will need to notify HMRC that you are self-employed which can be completed here.  
  3. Once registered, you will need to . This is so HMRC can calculate your tax liabilities.  
  4. Following on, you will receive a Unique Taxpayer Reference (UTR) within 10 days of completing your self-assessment.  
  5. Utilise your UTR number to establish a government gateway account, enabling you to submit your tax returns online.

Your tax return for each year needs to be submitted by midnight on 31st January, which gives you nearly 10 months to work it all out. To avoid falling short of any unexpected tax obligations, please reach out to one of our team! 

And there you have it! You are ready to pay your taxes. Please be aware that not paying your side hustle tax may result in fines from HMRC. Additionally, late tax payments can raise interest which will accumulate to a higher sum. But don’t worry, we are here to help you with any concern you should have so please reach out to a member of our team for guidance.  

Getting ready for deadlines: Submitting your Self Assessment tax return

Getting ready for deadlines: Submitting your Self Assessment tax return

by | Oct 2, 2023 | Latest News

Although the 2022/23 tax year may now seem like a distant memory, you still need to remember to submit your Self Assessment tax return on time! Self Assessment is the system that HMRC uses to collect Income Tax from those who receive income from other sources, such as self employment. There are various Self Assessment deadlines in upcoming months, and it’s vital that you’re prepared for them. The upcoming deadlines relate to all income from the period between 6th April 2022 and 5th April 2023.

 

The deadlines

If this is the first year that you have been required to submit a Self Assessment tax return, then you will need to notify HMRC by 5th October. You can do this by simply registering for Self Assessment.

There are two methods of submitting your Self Assessment tax return: by paper or online, and they have different deadlines. If you are planning to submit a paper tax return, then this must be done by midnight on 31st October 2023. Online submissions, on the other hand, must be completed by midnight on 31st January 2024.

If your tax return is up to three months late, then you will be subject to a late filing penalty of £100. If it’s later than three months, then the penalties go up.

It’s also important to note the deadline to pay any tax owed is 31st January 2024. If you miss this deadline then it’s likely you will be penalised, unless you agree a Time To Pay plan with HMRC. Interest will also be charged on late payments, even if you’ve agreed a payment plan.

 

An update for next year…

If you’re a PAYE taxpayer who earns over £100,000 PAYE income, then you’ll be aware that you must submit a Self Assessment tax return. However, when the deadline comes around for the 2023/24 tax year, the threshold will be increased to £150,000, reducing the amount of people who are required to submit a return! Although this will not impact your income tax obligations, it will significantly decrease the administrative burden of filing a Self Assessment tax return.

If you earn between £100,000 and £150,000 then you must still submit your Self Assessment tax return for the 2022/23 tax year by the deadlines outlined above. Once the deadline has passed, you should receive a Self Assessment exit letter from HMRC, unless you satisfy other aspects of the criteria.

At Fiander Tovell, we’re on hand to help you navigate Self Assessment as smoothly as possible. For further advice, please do not hesitate to get in touch with a member of our team on 023 8033 2733.

You can find more of the latest accountancy and tax updates here.