This section contains some very useful information relating to business, UK taxation and other financial areas.
From HMRC's perspective, here is an overview of the business start-up procedure in the UK:
Register for Self-Assessment: If you're starting a business as a sole trader or in a partnership, you need to register for self-assessment with HMRC. You can do this online through the HMRC website or by calling the HMRC Self-Assessment helpline.
Unique Taxpayer Reference (UTR): Upon registering for self-assessment, HMRC will issue you a Unique Taxpayer Reference (UTR). The UTR is a unique code that identifies you for tax purposes. You will need this reference when completing tax returns or corresponding with HMRC.
National Insurance Contributions (NICs): As a self-employed individual, you will be responsible for paying Class 2 and Class 4 National Insurance contributions. Class 2 contributions are a flat weekly rate, while Class 4 contributions are based on your annual profits. You will need to complete the appropriate forms and make the necessary payments.
VAT Registration: If your business turnover exceeds the VAT threshold (currently £85,000 in a 12-month period), you must register for Value Added Tax (VAT). VAT registration can be done online through the HMRC website. Once registered, you will need to charge VAT on eligible sales and submit VAT returns to HMRC.
PAYE Registration: If you have employees or plan to pay yourself a salary, you will need to register for Pay As You Earn (PAYE) with HMRC. This allows you to deduct income tax and National Insurance contributions from your employees' salaries and remit them to HMRC.
Keeping Records: It is essential to maintain accurate records of your business income, expenses, and other financial transactions. HMRC requires you to keep records for at least five years from the tax year-end. This includes sales and purchase invoices, bank statements, and other relevant financial documents.
Submitting Self-Assessment Tax Returns: As a self-employed individual, you will need to complete an annual self-assessment tax return to report your business profits and any other income or gains. The deadline for submitting tax returns is typically 31st January following the end of the tax year.
Making Tax Payments: HMRC will calculate your income tax and National Insurance liability based on the information provided in your self-assessment tax return. Payment deadlines for income tax and National Insurance contributions are typically 31st January and 31st July each year, with additional payments on account if required.
Additional Reporting and Compliance: Depending on the nature of your business, you may have additional reporting and compliance obligations with HMRC. This could include Construction Industry Scheme (CIS) reporting, or other industry-specific requirements.
If you're starting a limited company in the UK, the business start-up procedure involves the following steps:
Company Name and Structure: Choose a unique name for your company that complies with the naming guidelines set by Companies House. Decide on the company's structure, such as limited by shares or limited by guarantee, and determine the initial shareholding and the number of directors.
Registered Office Address: Select a registered office address for your company. This address will be publicly available and used for official correspondence with Companies House and other authorities.
Directors and Shareholders: Appoint at least one director who will be responsible for the company's operations and compliance. If you have multiple directors, determine their roles and responsibilities. Identify the shareholders and their respective shareholdings.
Memorandum and Articles of Association: Prepare the Memorandum and Articles of Association, which define the company's purpose, activities, and internal rules and regulations. You can use standard model articles or create bespoke articles for your company.
Incorporation: Register your company with Companies House. This can be done online or through a formation agent. Provide the required information, including company name, registered office address, details of directors and shareholders, and share capital structure. Pay the registration fee, and upon successful registration, you will receive a Certificate of Incorporation.
Corporation Tax Registration: Once your company is incorporated, you must register for Corporation Tax with HM Revenue & Customs (HMRC). This can be done online, and you'll need your company's Unique Taxpayer Reference (UTR), which will be issued by HMRC upon incorporation.
Statutory Registers and Records: Maintain various statutory registers and records, including registers of directors, shareholders, and people with significant control (PSC). Keep records of board meetings, resolutions, and any significant changes within the company.
Accounting and Financial Reporting: Set up an accounting system to manage your company's financial records. Prepare annual financial statements in accordance with the applicable accounting standards and file them with Companies House. Ensure compliance with the filing deadlines.
Payroll and PAYE: If your company has employees, you need to register for Pay As You Earn (PAYE) and operate a payroll system. Deduct income tax and National Insurance contributions from employee salaries and submit the necessary returns to HMRC.
VAT Registration: If your company's turnover exceeds the VAT threshold (currently £85,000 in a 12-month period), you must register for Value Added Tax (VAT) and charge VAT on eligible sales. Submit regular VAT returns to HMRC.
Business Bank Account and Insurance: Open a dedicated business bank account to keep your personal and business finances separate. Consider obtaining appropriate business insurance, such as employer's liability insurance or professional indemnity insurance, to protect your company.
There are several VAT schemes available that businesses can choose from based on their size, turnover, and specific needs. Here are some of the VAT schemes that may be relevant to your business:
Standard VAT Scheme: This is the default scheme for VAT registration. Businesses registered under the standard scheme charge VAT on their sales and reclaim VAT on their purchases in the usual way. VAT returns are filed quarterly or monthly, depending on the size of the business.
Flat Rate Scheme (FRS): The Flat Rate Scheme simplifies VAT accounting for small businesses. Instead of calculating VAT on each sale and purchase, you pay a fixed percentage of your gross turnover as VAT to HMRC. This percentage depends on your industry sector. You can keep the difference between the VAT you charge your customers and the VAT you pay to HMRC, except for a small reduction for the first year.
Annual Accounting Scheme: This scheme is suitable for businesses with a turnover below £1.35 million. Instead of filing VAT returns quarterly, businesses file them once a year under the Annual Accounting Scheme. They make interim payments throughout the year based on an estimated liability, with a final balancing payment or refund at the end of the year.
Cash Accounting Scheme: Businesses with an expected turnover below £1.35 million can use the Cash Accounting Scheme. Under this scheme, you account for VAT based on cash received and paid, rather than on the invoice date. This can help with cash flow management, as you only pay VAT on your sales when your customers have paid you.
Retail Scheme: This scheme is designed for businesses that primarily sell to the general public, such as retailers. It simplifies the calculation of VAT by using predefined percentages based on the type of goods sold. It reduces the need for detailed records of individual sales, making VAT accounting more straightforward.
Margin Scheme: The Margin Scheme is applicable to businesses that deal in second-hand goods, antiques, or works of art. It allows VAT to be calculated on the difference between the purchase price and selling price (the margin) rather than the full selling price. This can reduce the VAT liability for certain types of goods.
Tour Operators' Margin Scheme (TOMS): The TOMS is for businesses operating in the travel and tourism industry, such as travel agents and tour operators. It calculates VAT on the margin between the buying and selling price of a holiday package, rather than the full selling price.
The UK payroll system is a crucial aspect of managing employee compensation and complying with payroll-related obligations. Here is important information regarding the UK payroll system:
Pay As You Earn (PAYE): PAYE is the system through which employers deduct income tax and National Insurance contributions (NICs) from employees' salaries before paying them. Employers are responsible for calculating and deducting the correct amount of tax and NICs based on employees' earnings and tax codes.
Employer Registration: Employers must register with HM Revenue & Customs (HMRC) as soon as they hire their first employee. This includes registering for PAYE and obtaining an Employer PAYE Reference (EPR). Registration can be done online through the HMRC website.
Employee Information: Employers must collect certain information from employees, such as their full name, date of birth, National Insurance number, and tax code. This information is used to calculate the correct tax and NIC deductions.
Payroll Frequency: Employers typically run payroll on a monthly or weekly basis, although other frequencies are possible. The payroll frequency determines when employees are paid and when payroll reports and payments are submitted to HMRC.
Payroll Records: Employers are required to maintain accurate payroll records for each employee, including details of their earnings, tax deductions, and NICs. These records should be kept for at least three years from the end of the tax year to which they relate.
Payroll Software: Employers often use payroll software to automate payroll calculations, generate payslips, and submit payroll reports to HMRC. There are various payroll software options available, including cloud-based solutions and HMRC-approved software.
Real-Time Information (RTI): Employers are required to report payroll information to HMRC in real-time through the RTI system. This includes submitting Full Payment Submissions (FPS) each time payroll is run, as well as Employer Payment Summaries (EPS) to report any adjustments or corrections.
Auto-Enrolment Pension Scheme: Employers must comply with auto-enrolment regulations, which require them to provide a workplace pension scheme for eligible employees and make contributions on their behalf. Employers need to assess employees' eligibility, enrol them in the pension scheme, and make the necessary contributions.
Statutory Payments: Employers may be responsible for administering and paying various statutory payments, including Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), and Statutory Adoption Pay (SAP). These payments have specific rules and entitlements that employers must adhere to.
Year-End Reporting: At the end of each tax year (which runs from 6th April to 5th April), employers must provide employees with a P60 form summarizing their earnings and deductions for the year. Employers are also required to submit a year-end report (Final Submission) to HMRC, which includes details of employees' earnings and deductions.
The accounts filing deadlines for different types of entities are as follows:
Filing annual accounts with Companies House: Generally, the deadline is 9 months after the end of the company's financial year.
Submitting Corporation Tax return to HM Revenue & Customs (HMRC): Usually, the deadline is 12 months after the end of the accounting period.
Filing annual accounts with Companies House: The deadline is 9 months after the end of the financial year.
Submitting Partnership Tax Return to HMRC: The deadline is usually 12 months after the end of the accounting period.
Submitting Self-Assessment tax return to HMRC: The deadline for online filing is January 31st following the end of the tax year (April 5th).
The corporation tax payment deadline in the United Kingdom depends on the accounting period of the company. The general deadline for paying corporation tax is 9 months and 1 day after the end of the accounting period.
For example, if a company's accounting period ends on 31st December 2022, the corporation tax payment deadline would typically be on or before 1st October 2023 (9 months and 1 day after the end of the accounting period).
It's important to note that if the company's annual profits exceed a certain threshold, known as the "large company threshold," the payment deadlines may differ. Additionally, there may be different deadlines for making payments on account.
The self-assessment payment deadline in the United Kingdom depends on the tax year you are filing for. Generally, for individuals who complete a self-assessment tax return, the payment deadline is on or before the 31st of January following the end of the tax year.
For example, for the tax year 2022/2023 (which runs from 6th April 2022 to 5th April 2023), the payment deadline would be 31st January 2024. This is also the deadline for submitting your self-assessment tax return if you file it online.
The VAT return filing and payment deadlines in the United Kingdom are as follows:
The deadline for both filing and submitting a quarterly and monthly vat return is one month and seven days after the vat period has ended For example, if you are completing vat return for the February 2023 quarter, then you are obliged to file and make payment for the VAT by the 7th of April 2023.
The deadline to file your annual vat return is 2 months after the end of your accounting period.
Payment deadline for an annual vat return is as follows:
You must make advance payments towards your VAT bill (either monthly or quarterly) during your accounting period and a final payment when you submit your VAT Return.
Monthly – Due at the end of months 4, 5, 6, 7, 8, 9, 10, 11 and 12
Quarterly – Due at the end of months 4, 7 and 10
Final payment – within 2 months of month 12
FPS Filing Deadline: The FPS is the report submitted to HMRC each time you pay your employees and includes information such as earnings, tax deductions, and National Insurance contributions. The deadline for submitting FPS is typically on or before each payday, i.e., on or before the date you pay your employees.
RTI Filing Deadline: Real Time Information (RTI) is a system that requires employers to report payroll information to HMRC in real time. The RTI filing deadline is aligned with the FPS filing deadline, which means it is also on or before each payday.
The PAYE (Pay As You Earn) payment deadline for HMRC (Her Majesty's Revenue and Customs) depends on the frequency of your payroll. Here are the typical payment deadlines:
It's worth noting that if the 22nd falls on a weekend or a bank holiday, the payment deadline is moved to the next working day. Additionally, if you pay electronically, such as through online banking or Direct Debit, the payment must clear into HMRC's account by the deadline.
The P11D filing and payment deadline in the United Kingdom is typically July 6th following the end of the tax year. The P11D is a form used to report expenses, benefits, and certain other taxable items provided to employees and directors.
Here are the key points regarding the P11D filing and payment deadline: