When Exactly Do I Need To Register For Self-Assessment? Examples Included.
If you run your business as a sole trader or are self-employed, you have to pay income tax to HMRC. Unless whatever you do is just a hobby or generates a very small income which qualifies you for trading allowance.
You report your income and expenses as a self-employed person via so-called Self-Assessment. Before you are able to do that, you need to first register for this service with HMRC.
You don’t need to register as self-employed or sole trader straight away. But you have to do it by 5th October in your second year of trading.
Sounds a bit confusing? Let’s look at the examples.
When Do You Need To Register For Self-Assessment?
Example 1
A tax year in the UK runs from 6th April to 5th April the following year. So, the tax year 2023/2024 starts on 6th April 2023 and finishes on 5th April 2024.
If you start your business in June 2023, this is in the tax year 2023/2024 because it started between 6th April 2023 and 5th April 2024. This is your first tax year.
You have to register for Self-Assessment by 5th October in your second year of trading. Your second year of trading is the year 2024/2025 (the first year was 2023/2024).
The second year starts on 6th April 2024. In this situation your deadline for registering with HMRC is 5th October 2024.
Example 2
You started your business in January 2023. As a reminder, a tax year in the UK starts on 6th April and finishes on 5th April the following year.
If you started your business in January 2023, this was between 6th April 2022 and 5th April 2023. So, you first year of trading is 2022/2023.
HMRC requires you to register for Self-Assessment by 5th October in your second year of trading. If you first year of trading is 2022/2023, your second year of trading is 2023/2024. This means you have to register for Self-Assessment by 5th October 2023.
Will HMRC tell me I need to do a Self-Assessment tax return?
If you’ve just started trading, HMRC won’t know about this and won’t notify you that you need to file a Self-Assessment tax return. You need to make sure you register with them before the deadline as per the examples in the paragraph above.
If you don’t tell them and you continue trading, they will find out at some point and you will have to backdate all your tax that you failed to pay. So, it’s a very bad idea to delay your registration or fail to register at all.
HMRC has very effective ways and tools to track undeclared income. If they discover you haven’t been declaring your income, it will be seen as tax evasion and you can be subject to severe penalties.
Not sure how to do your Self-Assessment tax return? Would you like a professional accountant to help you? Get in touch with our Oxford accounting office and see how we can help.
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