I started my business in the summer. Should I have completed a tax return this January?

No, the first tax return you will need to complete is for the year ended 5th April 2018, the tax year in which your business started. The online filing deadline for this return is 31st January 2019.

You need to register for Self Assessment as soon as possible after your business starts and no later than 5 October in your business’ second tax year (5th October 2018 in your case) to avoid fines.

Registration can be completed online with HM Revenue & Customs. Once you have registered you will receive a 10-digit Unique Taxpayer Reference (UTR) and an activation code to enable you to access your online services.

Any tax due will also be payable by 31st January 2019. If the tax due is above £1,000, ‘payments on account’ may also be due. These are instalments towards next year’s tax bill and are paid in addition to this year’s tax bill. In your first year, payments on account can be a nasty surprise so make sure you put aside enough for your tax liability.

I set up a new company last September. It’s trading but I haven’t taken anything out of it yet. Do I need a tax return?

As a director/shareholder there are a number of different ways to extract money from your company. Whether you are required to complete a return will be dependent on the methods you use.

One of the most common ways to receive money from your company is by receiving a salary. Depending on the level of your salary, this may have tax and national insurance taken at source, as would be the case if you were an ordinary employee.

As a shareholder, you can also take dividends. These are paid out of company profits, so this will only be possible where such profits are being made. The first £5,000 of dividends from all sources received by an individual are tax-free. Additional tax will be due if your dividend income exceeds this amount.

Last but not least, the company may simply owe you money. It is likely you have had to invest funds to get the business started and these can be returned to you without tax consequences. However, if you charge the company loan interest, that additional amount would be taxable income.

HMRC are of the opinion that all directors need to complete tax returns, except where they are directors of a charity. While this is not the strict legal position, it is likely HMRC will request a return from directors regardless. Once HMRC have issued such a request a return must be completed. If you have untaxed income, such as dividends in excess of £5,000, you must complete a return whether one has been requested or not. 

Discaimer: Advice shared in this article is intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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