THOSE IGNORE-THEM-AT-YOUR-PERIL DATES FOR YOUR DIA
Straight-talking BOSS finance director Heather Darnell reveals the need-to-know tax details to deal with before you take your first order.
There are two things that we fear the most when starting a business:
1. Getting in trouble with the taxman by not getting all that mysterious paperwork done.
2. Getting your pricing wrong. Charge too much or too little at the outset and we set a precedent that’s hard to wriggle out of.
But let’s tackle Point 1 first. There is no reason to fear the good people at HMRC if your bookkeeping is in order, regardless of whether you are self-employed or a limited company. So here’s what you need to do and when in order to stop that fear creeping up on you.
Dates For Your Diary If You Are A Sole-Trader…
1: WITHIN THREE MONTHS
* Contact HMRC to let them know you are now self-employed. This will trigger your paperwork for paying personal National Insurance and for a self-assessment tax return every year.
2: ON 31ST JANUARY
* Submit your tax return electronically (31st October if submitting in paper format).This is also one of the dates you pay your income tax each year, the other being 31st July.
3: ONCE A MONTH
* Deduct 25% of your turnover and transfer it safely to a separate tax account. Then don’t touch it until Date For Your Diary 2. This amount is just an estimate – your ultimate tax bill may be higher or lower, but it is a good approximation and a great habit to get into.
Unless your turnover is enough to be VAT registered (more on this later) or you’ve got employees, these are the only dates you need to know.
Dates For Your Diary If You Are A Limited Company…
1: EVERY YEAR ON THE ANNIVERSARY OF THE CREATION OF YOUR LTD COMPANY
Submit a Confirmation Statement to Companies House.
2: NINE MONTHS AFTER YOUR YEAR END
* Submit your Annual Accounts to Companies House (a weird exception to this is that your first set of accounts is due to Companies House 21 months after your date of incorporation regardless of your financial year end).
* This is also when your corporation tax payment is due to HMRC
3: TWELVE MONTHS AFTER YOUR YEAR END
* Submit your Annual Accounts and Corporation Tax Return to HMRC (another exception – your first accounts and company tax return are due 24 months after your date of incorporation).
4: ONCE A MONTH
* Deduct 10% of your turnover for corporation tax and put it straight into a separate tax account.
Something that could affect both sole traders and limited companies is whether you are VAT registered. For many people, this scares the pants off them, as they fear the time and paperwork involved. The great news is, there’s no need to be afraid of registering for VAT, and I’ll explain more about why it’s worth doing so in my next blog post.
If you mainly sell to consumers and small companies who aren’t registered for VAT it’s probably not worth registering. But that would be the only reason it’s not worth registering, and you HAVE to register for it if your turnover is more than 85K a year.
Date For Your Diary: AS SOON AS YOU LIKE
* Register for VAT. Seems scary but trust me, you will not regret it.