Sole Traders
You need to register with HMRC as self employed no later than 5 October after the end of the tax year you started trading in. Eg if you started trading during the 2023-24 tax year, from 6 April 2023 to 5 April 2024 then you need to register no later than 5 October 2024. However there is no advantage in leaving it till then – we recommend doing it at the time you start trading.
The registration obligation applies even if you don’t think you will owe tax, eg your profit is below Personal Allowance. The only exception is if your gross income from Self Employment is less than £1,000 (Trading Allowance)
If you are already within Self Assessment, eg landlord or higher earning employee, you still need to register as Self Employed otherwise Class 2 NI isn’t properly collected
You register via HMRC website or by phone – 0300 200 3500
If you only have a very small amount of Self Employed Income then there is a £1,000 “Property and Trading Income Allowance” – in HMCs own words:
“The government announced at Budget 2016 the introduction of a £1000 allowance for property income and a £1000 allowance for trading income from the 2017 to 2018 tax year. The new allowances will mean that individuals with property income below £1000 or trading income below £1000 will no longer need to declare or pay tax on that income. Those with income above the allowance will be able to calculate their taxable profit either by deducting their expenses in the normal way or by simply deducting the relevant allowance from their gross income. Legislation will be introduced in Finance Bill 2017.” (source)
We’ve confirmed with HMRC that you have no obligation to register as Self Employed if you earn less than £1,000 a year.
Partners (including LLP partners)
The process is similar but you have to register with HMRC:
- The partnership itself for tax purposes
- Each individual partner
- Deadline 5 October after end of first tax year (same as above)
Limited Companies
The process here is a little more complex
- First the company must be registered itself at Companies House (and that applies to a LLP as well)
- Within three months of starting business you must Register for Corporation Tax
- When you first start drawing a directors salary from the business, or pay other staff, you must register as an employer and operate PAYE on pay and salaries, including directors salaries
- If you are employing other people as well a yourself as a director you will need to provide a Workplace Pension and send a Declaration of Compliance to The Pensions Regulator within five months
- If you staff are paid below £833/m there may be an exemption
- If you are a single director or otherwise exempt from providing Workplace Pensions, then tell The Pensions Regulator you are exempt
- Register for Self Assessment as a company director (this isn’t strictly a legal requirement unless you will owe tax, but its good practice to do it as a matter of course)
