Blog and News

You’ve started a business – now what?

Congratulations on taking the first step, which can be daunting. We’re here to help you understand and deal with the tax implications of this.

Firstly, you’ll need to let HMRC know that you’re self-employed and there are 3 crucial steps to this:

1) You’ll need to register for a Government Gateway account  

2) Once you’ve got that, you’ll need to register for Self Assessment and tell HMRC you ‘ll need to complete a tax return. If you’re already completing a tax return then you only need to register for Class 2 NIC – see next:

3) As part of step 2), make sure you also register for Class 2 National Insurance. This is often overlooked but see our blog here on why it’s crucial for self-employed people to pay this.

NB: In this article we’re assuming you are a sole trader. If you’ve set up a limited company, some of this won’t apply to you. Give us a call instead.

I’ve done that – when do I need to do a tax return?

The UK tax year runs from 6th April to the following 5th April and tax returns are completed for each tax year. It’s an odd year end – if you’re a nerd like me, here’s an explanation of why it’s this seemingly random date.

Let’s say you started this business in July 2024. That falls into the 24/25 tax year, so the first tax return you need to do will be for the year ended 5th April 2025.

This will cover all your profits to 5th April 2025 however if you prefer to prepare accounts to 31st March 2025 instead, that’s fine – most accounting software works on calendar months, and HMRC allow both options.

The filing deadline for the 24/25 tax return is the 31st January 2026. That’s a deadline not a target – it makes sense to file as soon as you can. Not least because finding an accountant with capacity to take you on two weeks before the deadline is a near-impossible task.

As a guide, we aim to complete tax returns within 4-6 weeks of receiving your figures, and around 75% of our clients’ tax returns are filed by September each year.

OK, my return is filed – when do I pay the tax?

Normally, tax is due by 31 January each year i.e. 31 January 2026 for the 24/25 tax year. If you file your return early, the payment date does not change – you just get more notice to plan for the amount due.

OK, that sounds simple enough, but there is an added complication of Payments on Account. In short, once HMRC have an idea of your business profits, they will ask you to start paying in advance for the tax on next year’s profits, as follows:

– 31 January 2026 – pay your tax bill for 24/25 in full, say £2,000

– Also 31 January 2026 – pay 50% of the above (say, £1,000) in advance for your 25/26 tax return

– 31 July 2026 – pay another 50% (£1,000) towards your 25/26 liability.

When you get to January 2027 – the payment date for next year’s tax – whatever your liability is, you can knock £2,000 off it because you’ll have been paying that in advance. 

So you’ll just make a balancing payment based on the difference between your expected and actual tax liability, and then pay another 50% payment for the following year. And so on.

Fear not – when we prepare your tax return, we’ll schedule out exactly what you need to pay, and when

This means that in your first year of business, it can feel like you’re essentially paying two years’ tax bills in the space of one year. It needs careful planning to ensure the business can cope with the cash flow hit.

As time goes on, and your profits grow, so will your tax. Hence normally the payments on account are less than the eventual tax bill. But, if you make lower profits than last year, you’ll actually get a refund. So that’s nice.

One final point is that if your tax liability is less than £1,000 then it does not trigger payments on account. So the shock of having to make payments on accountmight be deferred until your second year of business.

This all sounds more complicated – I thought tax doesn’t have to be taxing?

We agree. And frankly, it seems like HMRC set out to make it harder than it needs to be. 

Aside from the intricacies of calculating the actual profit figures, and getting your tax down as low as it can possibly be, a fair chunk of the work we do for our clients is helping them stay compliant with HMRC: tick all the boxes, jump the hurdles, and keep you away from penalties (and prison).

So if it’s time for you to leave all of this in the hand of professionals, Mark Ferbert is our resident tax expert. Head over to our contact page book a meeting with him.


Search for other articles

Recent articles