Tax FAQ

You need to file a Self Assessment if you are self-employed, a sole trader, a partner in a business partnership, or if you have income from property, investments, or foreign sources that is not taxed through PAYE. You also need to file if you earn over £100,000, claim Child Benefit and earn over £50,000, or have capital gains above the annual exempt amount.

The deadline for filing your online Self Assessment tax return is 31st January following the end of the tax year. For paper returns, the deadline is 31st October. Payment is also due by 31st January. Missing these deadlines results in an automatic £100 penalty, with additional penalties for further delays.

As a sole trader, you can claim allowable business expenses including office costs (rent, utilities, equipment), travel expenses (fuel, parking, train fares), staff costs (salaries, pensions), costs of goods bought for resale, marketing and advertising, professional fees (accountants, solicitors), and training courses related to your business. You cannot claim personal expenses or expenses not wholly for business purposes.

You must register with HMRC by 5th October following the end of the tax year in which you started self-employment. You can register online at GOV.UK. Once registered, you will receive a Unique Taxpayer Reference (UTR) number, which you will need for all tax-related matters.

As of April 2024, the main rate of Corporation Tax is 25% for companies with profits over £250,000. Companies with profits of £50,000 or less pay a small profits rate of 19%. For profits between £50,000 and £250,000, marginal relief applies, creating an effective rate between 19% and 25%.

Corporation Tax is due 9 months and 1 day after the end of your accounting period. For example, if your accounting year ends on 31st March, payment is due by 1st January the following year. However, companies with taxable profits over £1.5 million must pay in quarterly instalments.

Yes, there are several legitimate ways to reduce Corporation Tax: claim all allowable business expenses, utilise the Annual Investment Allowance for equipment purchases, claim Research & Development (R&D) tax credits if applicable, make pension contributions, and claim capital allowances on business assets. Proper tax planning with an accountant can identify further savings.

Your accounting year is the 12-month period your company uses for its financial accounts, which can start on any date. The UK tax year runs from 6th April to 5th April the following year. Corporation Tax is calculated based on your accounting period, which may span parts of two tax years.

You must register for VAT if your taxable turnover exceeds £85,000 in any 12-month period (the VAT threshold). You can also register voluntarily if your turnover is below this threshold, which may be beneficial if you sell to VAT-registered businesses or want to reclaim VAT on purchases.

The main VAT schemes are: Standard VAT Accounting (pay VAT on sales, reclaim on purchases), Flat Rate Scheme (pay a fixed percentage of turnover, simpler for small businesses), Cash Accounting Scheme (pay VAT when customers pay you), and Annual Accounting Scheme (make advance payments, submit one return per year). The best scheme depends on your business type and cash flow.

Most businesses submit VAT returns quarterly (every 3 months). Some businesses may be eligible for the Annual Accounting Scheme, submitting one return per year with advance payments. Since Making Tax Digital (MTD), all VAT returns must be submitted using compatible software.

Making Tax Digital (MTD) is HMRC's system requiring VAT-registered businesses to keep digital records and submit VAT returns using MTD-compatible software. This applies to all VAT-registered businesses regardless of turnover. You cannot submit VAT returns through the old HMRC portal anymore.

You must register as an employer and run PAYE if you pay any employee £123 or more per week, if they have another job or receive a pension, or if you provide expenses or benefits. Directors of limited companies taking a salary must also be processed through PAYE, even if they are the only employee.

Real Time Information (RTI) requires employers to report payroll information to HMRC every time they pay employees, rather than just annually. You must submit a Full Payment Submission (FPS) on or before each payday, and an Employer Payment Summary (EPS) if needed for adjustments.

For 2024/25, employee National Insurance is 8% on earnings between £12,570 and £50,270, and 2% above £50,270. Employer National Insurance is 13.8% on earnings above £9,100 per year. Different rates apply for specific categories such as apprentices under 25 and employees under 21.

Automatic enrolment requires employers to enrol eligible workers into a workplace pension scheme and make contributions. Workers aged between 22 and State Pension age, earning over £10,000 per year, must be enrolled. Minimum contributions are 8% of qualifying earnings (3% employer, 5% employee).

This depends on your circumstances. Limited companies offer limited liability protection, potential tax efficiency through salary/dividend combinations, and a more professional image. Sole traders have simpler administration and more privacy. Generally, limited companies become more tax-efficient once profits exceed £30,000-£40,000, but individual circumstances vary.

The typical strategy is to take a small salary up to the National Insurance threshold (around £12,570 for 2024/25) and take the remainder as dividends. Dividends are taxed at lower rates than salary (8.75%, 33.75%, or 39.35% depending on your tax band) and do not attract National Insurance. However, the company must have sufficient profits to pay dividends.

Yes, if you work from home, you can claim a flat rate of £6 per week (£312 per year) without needing receipts. Alternatively, you can calculate the actual additional costs of working from home (heating, lighting, phone, broadband) and claim the business proportion. For limited companies, you can claim £6 per week as a tax-free expense or set up a rental agreement for a dedicated office space.

The Annual Investment Allowance allows businesses to deduct the full cost of qualifying plant and machinery (equipment, vehicles, computers) from profits before tax, up to £1 million per year. This provides immediate tax relief rather than spreading it over several years. The AIA is particularly useful for businesses making significant capital investments.