Before you start your business in the UK you need to register with HMRC (Her Majesty’s Revenue and Customs). This is the first step to being officially in business!
The great thing is that registering your business is not difficult. The UK Government has an excellent website, www.gov.uk, that guides you through the tasks you need to do. The website is full of information, and of course kept up to date with any changes.
If you’ve read and followed the links in our Business Plan article, you will have probably already visited the gov.uk website to find out how much tax and National Insurance you will need to pay.
Setting up a business
This is the first page to look at on the gov.uk website. As mentioned, the gov.uk website is easy to navigate, but below are some links to specific topics that will be useful to you.
Working for yourself.
A useful definition of what being ‘self-employed’ business is, e.g. clearing out your loft and selling unwanted belongings at a boot fair twice a year isn’t regarded as a business. Buying something to resell at a profit is.
Set-up as a sole trader.
Information on what a sole-trader is and a link to register yourself as self-employed.
Set up a Limited Company.
Setting up a Limited Company is more involved than setting up as a Sole Trader, but it offers some benefits as your business grows.
A Limited Company is a separate business entity which you are the owner and director of, and can have other directors in the business. The Limited Company itself is responsible for payment of tax on profits, which can be less than the tax you pay on personal earnings.
If you are starting a business with a partner or partners, a Limited Company may be a better option than a Partnership Business.
Should there ever be a dispute or falling out between business partners in the future, it may be difficult to unravel who has contributed or owns what, especially if these agreements were off the record.
With a Limited Company all partners are directors, their financial contributions and ownership are defined at the outset and officially recorded in your companies annual returns.
Differences between Sole Trader and Limited Company.
This is a useful link from www.rossmartin.co.uk published in September 2018 that shows the differences between setting up as a Sole Trader and a Limited Company. Both have pros and cons, but generally if you are just starting out in business on your own, registering as a Sole Trader will be the simplest option. You can always change to a Limited Company at a later date.
Contact HMRC about setting up your business.
This link tells you how you can contact HMRC if you cannot find the information you are looking for. The HMRC phone line is only for businesses that are already registered, but you can use online chat and twitter.