Next, you’ll need to choose a legal structure for your business:
• Sole trader – the simplest business structure, but with no legal distinction between you and your business
• Partnership – if you’re starting a business with a business partner or partners
• Limited company – a complex structure with plenty of admin, but your business is legally distinct from you as an individual
If you’re not sure, please contact us and we can help talk it through with you!
Sole traders need to:
• Register with HMRC
• Submit an annual Self Assessment tax return
Limited companies need to:
• Register with Companies House
• Pay corporation tax on the profits you make from your business
• File a company tax return
• Pay VAT – mandatory if your turnover is over £85k
• As a self-employed person, you'll also need to send a Self Assessment
One of the benefits of registering as self-employed is you can claim back some of your expenses and reduce your tax bill.
And a good way to test your business venture without as much financial risk is to start a business alongside full-time employment – but make sure you understand everything about paying tax when you have a side hustle first.
You may also be able to recoup some of the tax you pay with new business tax relief, such as business rates relief and VAT relief.
Finally, be sure to keep up with all the self-employed tax changes that are introduced in April each year.