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Started a new business? Let HMRC know sooner rather than later!

Paystream News

David McManus

Tuesday 23rd May, 2017

Sometimes it's difficult to know exactly when a business starts or when a hobby turns into a business.

Selling items through online auctions can be fun, but as soon as you start buying items specifically to sell you are deemed to be trading.

The new micro-entrepreneur’s £1000 tax allowance will cover many individuals with small scale hobbies which earn them some income or those with occasional internet selling activities but if your new business is expected to generate a higher level of turnover you'll need to register with HMRC sooner rather then later.

Most people start off a new enterprise in a small way and so see themselves as a sole trader, or perhaps as a partnership with their spouse. Fewer will opt for the limited company at the outset.

If you have decided to go down the sole trader or partnership route you can register your fledgling business through the HMRC website. You will need to search for form CWF1 if you're going to be operating as a sole trader or SA400 if it's a partnership you’re looking to register.

The tax rules require that you notify HMRC by 5th October in the year after the end of the tax year in which the business started. So if you started your enterprise on, say 21 May 2017 you would need to register with HMRC by 5 October 2018.

If you don't meet that deadline and it turns out that you need to pay tax on the profits you made in the tax year 2017/18 and as a result didn't pay that tax until after the due date of 31 January 2019, you may be charged a failure to notify chargeability' penalty based on a percentage of the tax due as well as late payment interest.

Bear in mind too that if your business really takes off, you may need to register for VAT. Why not use the PayStream free online Tax Advice service to get some simple guidance on what you need to do?