Self-Employed - Always need to be registered for tax?
Discussion
Just a quick check, as I think I know the answer.
If someone is running a small business, even if they are never likely to get anywhere near their personal allowance in terms of income, are they always required to register with HMRC as self-employed?
Also, am I right in thinking that there is a 3 month grace period for registering?
If someone is running a small business, even if they are never likely to get anywhere near their personal allowance in terms of income, are they always required to register with HMRC as self-employed?
Also, am I right in thinking that there is a 3 month grace period for registering?
What you are registering is the fact that you will need to start completing Self Assessment Tax returns - and possibly pay Class 2 National Insurance.
If you started the business today, you would notify HMRC that you commenced trading on 4 October 2014 i.e. part way through tax year 2014/15.
HMRC will therefore issue you with a Notice to Complete a Self Assessment tax return for the year 2014/15. They will issue this notice to you a few weeks after 5 April 2015.
You will have until 31 January 2016 to submit this return. If you miss this filing deadline, you will receive an initial penalty of £100 (which goes up quite rapidly if you continue to fail to submit the return).
If any tax arises because of your self employed activity, this is also payable in full by 31 January 2016.
The deadlines mentioned above are assuming you will be filing the return electronically. If you want to submit the return on paper, the filing deadline is much earlier - 31 October 2015. You have to inform HMRC that you intend to file a paper return as they will not send one to you automatically.
If you decide that electronic filing is best (most people do), you need to apply in good time for a Government Gateway number and authentication code. The moral is do this soon after you receive your HMRC Self Assessment tax reference (commonly referred to as the UTR - Unique Tax Reference). Once you have this UTR, you can then go on-line and sort out the extra codes you need for electronic filing.
When you notify HMRC that you will need to complete Self Assessment tax returns, they also automatically assume that you will have to start paying Class 2 NI. Self Employed individuals pay this on a regular basis, either monthly by Direct Debit or Quarterly by cheque or individual payment from youir bank.
You can apply to NOT pay Class 2 NI if you know, in advance, that your Self Employed PROFIT (not gross sales) will be below the Class 2 NI threshold. This is currently £5,885. This is known as "Small Earnings Exception" or SEE.
If you started the business today, you would notify HMRC that you commenced trading on 4 October 2014 i.e. part way through tax year 2014/15.
HMRC will therefore issue you with a Notice to Complete a Self Assessment tax return for the year 2014/15. They will issue this notice to you a few weeks after 5 April 2015.
You will have until 31 January 2016 to submit this return. If you miss this filing deadline, you will receive an initial penalty of £100 (which goes up quite rapidly if you continue to fail to submit the return).
If any tax arises because of your self employed activity, this is also payable in full by 31 January 2016.
The deadlines mentioned above are assuming you will be filing the return electronically. If you want to submit the return on paper, the filing deadline is much earlier - 31 October 2015. You have to inform HMRC that you intend to file a paper return as they will not send one to you automatically.
If you decide that electronic filing is best (most people do), you need to apply in good time for a Government Gateway number and authentication code. The moral is do this soon after you receive your HMRC Self Assessment tax reference (commonly referred to as the UTR - Unique Tax Reference). Once you have this UTR, you can then go on-line and sort out the extra codes you need for electronic filing.
When you notify HMRC that you will need to complete Self Assessment tax returns, they also automatically assume that you will have to start paying Class 2 NI. Self Employed individuals pay this on a regular basis, either monthly by Direct Debit or Quarterly by cheque or individual payment from youir bank.
You can apply to NOT pay Class 2 NI if you know, in advance, that your Self Employed PROFIT (not gross sales) will be below the Class 2 NI threshold. This is currently £5,885. This is known as "Small Earnings Exception" or SEE.
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