Bookkeeping Services Aberdeen

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Registering with HMRC

Working for yourself as a sole trader – you must register with HMRC by the 5th of October after the end of the tax year in which you started trading. If not, HMRC may impose a penalty based on tax due.

Ways in which to register:

The tax rules are different for being self-employed versus being an employee. Tax and National Insurance is deducted from your pay at source by your employer but being self-employed, you will receive a bill from HMRC for both to be paid at a later date.

Taxable Profits

Tax is due on your profit.  This is your income less any allowable business expenses that you are entitled to claim.

Equipment – generally, full cost can be claimed.

Vehicles – a % can be claimed over time (dependent on age and emissions).  This is known as a written down allowance (WDA).

Any personal expenses you pay for from the business are deemed as drawings, same as wages.

Self-assessment tax return (SATR)

The tax year end is 5th April but it is usual for businesses to have their year-end as 31st March which keeps it in line with the tax year. Tax returns must be submitted to HMRC by 31st January after the year end.  A tax calculation will be included when the tax return is submitted which will show your tax and National Insurance due for the tax year just completed.

Please note – if you don’t pay your tax bill on time, you may be liable for a penalty charge.

How do I pay my tax?

If your tax liability for the year is greater than £1,000, you will pay the tax due for that year PLUS a payment on account of 50% upfront for the following year.  So, in your first year of trading you will pay the full tax due for the year plus 50% by 31st January after the end of the tax year.  Another payment on account will be due by 31st July and these 2 payments on account go towards your tax due for the following year.  In effect, you are always paying ahead.

Along with tax due, there are 2 types of National Insurance the self-employed pay and these are Class 2 (weekly flat rate) and Class 4, both dependent on profits.

You can pay your tax online via your own Government Gateway account or you can request a statement and pay via your bank or post office.

The onus is on you to make sure you have enough money put aside to meet your liability to HMRC.  If you are late in paying your bill, you may be liable to an interest charge and this is not an allowable business expense.

Registered with HMRC Anti Money
Laundering Scheme.

Teresa Smith Bookkeeping
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