Question?>Answer
Q: When should I register my business?
A: The Self-Employed
Should register with HMRC when they start receiving income from their activities in any amounts above the Personal Allowance.
Registration is legally bound by the 5th of October in the second year of Self-Employment. The first bill arrives after a while, so you should budget how much money to set aside.
Limited Companies A new company must notify HMRC that it has started trading, even if it has not made any profits. Registration is completed with Companies House. Additionally, a limited company must file a Memorandum defining its powers and objectives regarding dealings with others. Prospective investors can access this information, along with the company profile and finance. It adds to its status and credibility when approving loans and deciding investments.
Q: What is Personal Allowance?
A: A tax-free amount everyone receives each financial year. PA 2023/24 – £12,570. Children have the same personal tax allowance as adults, but they usually do not go over the threshold as they do not work and may only be saving small amounts in a bank. Parents must pay income tax at the income tax rate if they use up their tax allowance. All savings and investments other than an ISA in the child’s name that bring £100 interest are taxed and treated as if they were the parents’ money.
Q: What is PAYE?
A: A system used by HMRC to collect Income Tax. Tax and NI contributions are deducted automatically from the source: wages, pensions and savings. Under PAYE, HMRC calculates tax liability. Self-employed and employed individuals receiving additional income must complete a Self-Assessment Tax Return each year.
Employed
Under Paye
There are 3 main Tax rates in the UK
· 20% income up to £50,270
· 40% income £50,271 £125,140
· 45% income above £125,141
Q: Who pays National Insurance Contributions?
Everyone over 16 years to Pension age pays NI Contributions. For the employed it is when they start earning over £125 per week £542 per month £6,500 per year(Lower earnings limit), £242 a week or £1,048 £12,570 per year (Primary threshold) a month, since April 2025. For the self-employed, when they start making a profit of £12,570, which is aligned with the Personal Allowance. Everyone has a record of National Insurance Contributions. A minimum amount of contributions is necessary for a full contribution year. A total of 30 years of contributions are considered qualifying years for a basic state pension.
Q: What tax does a Limited Company pay?
A: Corporation Tax
Small profits rate –19% income to £50,000. Main rate – 25% on profits above £250,000. Marginal rate – 26.5% income above £250,000. Tax-allowable business expenses can reduce corporation tax.
Some companies can claim Research and Development Allowance (R&D) if they work on innovative projects, science and technology. They must adhere to R&D criteria.
Q: When should the business register for VAT?
A: VAT Registration is not obligatory if your turnover is below £85,000..
However, it is advised to consider registration if your business approaches the threshold.
You may voluntarily register for VAT. After registration, you must submit it every three months.
Under Making Tax Digital, Companies can only submit VAT to HMRC through MTD-compatible software.
Find out which software is approved by HMRC.
Q: What are Micro-Companies?
A: To be considered as a Micro-Company, a company must meet 2 out of 3 criteria, allowing it also to report under FRS105
· turnover up to £632,000
· Balance sheet – £316,000
· Employees – 10
Under FRS105, micro-companies can complete financial statements in a much reduced, simplified way without details.
