Guide to starting up in business part 2 – Who to notify
This is the second installment of a five part article regarding setting up in business which can sometimes seem a very daunting process. The aim of these articles is to draw to your attention to some of the main points to consider from an accounting and tax perspective. In the first article we looked at the different type of legal status for your business.
So you have decided through which legal status your business is going to trade. The next question is who do you need to notify? The answer to this depends on the legal status you have chosen.
Sole Trader / Partnership
If you are trading as a sole trader or a partnership then you will be classed as self employed and you must notify HM Revenue and Customs (HMRC) accordingly. This can be done online or via the self employed helpline. HMRC stipulate that you should inform them as soon as you become self employed. Certainly it must be within three months of the start of trading otherwise you may incur penalties. As self employed you will be liable to Income Tax and Class 4 NIC on any profits made. You will also be liable for Class 2 NIC which is paid at a weekly flat rate (currently £2.65). However if you profits are expected to be below a certain level (currently £5,595) you can apply for an exemption from the Class 2 installments.
To trade through a limited company you first need to set up the company and register it with Companies House. You can do this yourself through the Companies House website but unless you really know what you are doing I would advise you get professional assistance from a qualified accountant who can advise on share holdings etc. Once the company is registered with Companies House they will inform HMRC who will send you a CT41G New Company Details form. Filing this in and returning it to HMRC will register the company for Corporation Tax which it will be liable for on any profits.
In the next article we will look at PAYE and VAT.
If you would like to discuss setting up in business or any other accounting or taxation issues please don’t hesitate to contact us. We are an ACCA registered accountancy practice located in the Northamptonshire village of Lamport. From Michael Paul Accountants Northampton, Kettering, Market Harborough and Corby are all within easy reach.