When your ideas start bringing you income, you must register as Self-Employed.

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.

A New Company must notify HMRC that it has started trading even if it does not make 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 . This information, along with the company profile and finance, can be accessed by prospective investors. It adds to its status and credibility when approving loans and deciding investments.

To be considered as a Micro-Company, a  company must meet 2 out of 3 criteria, allowing her also to report undeFRS105  

  • 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.

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 in receipt of additional income must fill out a Self-Assessment Tax Return each year.

It is a tax Limited Companies pay on their profits. Main rate – 25% on profits above £250,000, Small profits rate – 19%  income to £50,000, Marginal rate – 26.5%  income above £250,000. Corporation Tax can be reduced by the tax-allowable business expenses. 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.

A tax-free amount everyone receives each financial year. PA 2023/24 – £12,570. Children have the same as adults personal tax allowance, but they usually do not go over the threshold as they do not work and may only be saving small amounts in a bank. If they use up their tax allowance, parents must pay income tax at the income tax rate. All savings and investments other than ISA on the child’s name that bring £100 interest are taxed and treated as if it were parents’ money.

There are 3 main Tax rates In the UK

  • 20% income up to £37,700
  • 40% income £37,700  £125,140
  • 45% income above £125,140

Everyone over 16 years  to Pension age pay NI Contributions. For employed it is when they start earning over £242 a week or £1,048 a month. For self-employed, when they start making 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 contributions year. A total of 30 years of contributions are considered qualifying years for a basic state pension.

6th– 5thApril following year-UK Tax year:

6th July – Form 11D expenses, benefits, profits to directors and employees must be reported.

31th October paper filing of tax return deadline.

30th December: employed can chose to pay any tax due through PAYE code, when filing returns by this date.

31st January online self-assessment filing deadline. 31st July second payment on account deadline       

VAT Registration is not obligatory if your company income is below £85,000 (2022-23 tax year).

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.