Once your company formation is completed and you’re officially registered and trading, there are a number of imperative administrative tasks you’ll need to process: including the obligatory Self-Assessment for your company tax returns. Here we outline how, and when, you must register for Self-Assessment, listing all relevant deadline details.
What Is Self-Assessment?
Before you register for Self-Assessment by deadline, it’s important to understand exactly what defines the process of Self-Assessment.
Self-Assessment is short for the “Self-Assessment tax return” — a form that most business owners must send to HMRC (HM Revenue and Customs) on an annual basis in order to report how much they have earned and from where that income has been generated. The term “Self-Assessment” precisely indicates that an individual, or company, has the responsibility to calculate how much tax they should pay. The Self-Assessment tax return is usually just called a “tax return”.
According to the GOV.UK website, Self-Assessment is “a system HMRC uses to collect Income Tax”. Tax is normally deducted from wages, pensions and savings automatically. People and/or businesses who have additional income must report it in a tax return.
Using the figures and guidelines supplied by HMRC, we can work out exactly how much tax we need to pay each year as individual tax payers. We are responsible for accurately calculating how much tax we owe and making sure we pay HMRC according to their payment deadlines.
Individuals Who Must Register for Self-Assessment by Deadline Due Date
The following are the group of individuals who have to register for Self-Assessment by the deadline and subsequently send tax returns and pay their Income Tax and National Insurance Contributions on their taxable income through Self-Assessment:
- Sole traders who are self-employed
- Directors of limited companies
- Partners (members) in general partnerships and limited liability partnerships (LLPs)
- Employees who are claiming expenses over £2,500/tax year
- Individuals with an annual income over £100,000
- Individuals who receive rental income over £2,500 from UK property or land
Self-Assessment for a Sole Trader
When you’re a sole trader, you have to register for Self-Assessment by the deadline since HMRC will not know how much profit your business has made during the past year as sole trader’s tax deductions will not automatically be submitted. For this reason, as a sole trader, you must submit your figures for profit and loss in your Self-Assessment form so that HMRC can work out exactly how much tax and National Insurance you need to pay at the end of each tax year.
Being a sole trader is arguably the most autonomous form of business structure; particularly advantageous for those with small businesses with a taxable annual income under £20,000.
Self-Assessment for Limited Company Directors
Although they may be owners of a business, limited company directors are technically “company employees”. Directors normally receive a salary through PAYE. Their personal tax and Class 1 National Insurance will be deducted at source.
However, dividend payments, directors’ loans, benefits and expenses are NOT deductible through PAYE and therefore directors must register for Self-Assessment by deadline dates outlined below.
Self-Assessment for LLP Members
LLP members are individuals who are self-employed and collectively run a business as a partnership. The LLP itself is not taxed but its members are individually taxed on their share of company profits. Hence, LLP members must register for Self-Assessment by deadline dates listed below.
Register for Self-Assessment by Deadline Dates Below
Here’s a demonstrable outline of a tax year (2018-19) that remains consistent each year as displayed on the GOV.UK website:
|Register for Self-Assessment if you’re self-employed or a sole trader, not self-employed, or registering a partner or partnership
|5 October 2019|
|Paper tax returns
|Midnight 31 October 2019|
|Online tax returns||Midnight 31 January 2019|
|Pay the tax you owe||Midnight 31 January 2020|
You must submit an online return by 30th December if you wish HMRC to automatically collect any owed tax from your wages and pension. However, eligibility applies.
If you’re a trustee of a registered pension scheme or a non-resident company, you must file a paper tax return to HMRC by 31st January. An online return cannot be sent.
If you have a company as a partner: In a partnership, if your partnership’s accounting date is between 1 February and 5 April and one of your partners is a limited company, the deadline for online returns is 12 months from the accounting date, and the paper returns is 9 months from the accounting date.
How Much Tax Is Owed?
Before you register for Self-Assessment by deadline dates listed, it’s important to know how much tax is owed.
Income Tax is charged at varying rates. Individuals who are born after 5th April 1948 with an annual income that is lower than £100,000 can obtain a Personal tax-free Allowance of £11,850 (2018-19 tax year). Income earned above this amount is subject to the following tax rates:
|INCOME TAX RATE||ANNUAL INCOME:|
|20%||Up to £33,500 (or £45,000 if you incl. the tax-free Personal Allowance)|
|20%||Between £33,501 – £150,000 (or £45,001 -£150,000)
How Is HMRC Informed of a Director’s Salary?
When you’re a director of a registered limited company (and you’ve gone through the company formations process to officially register you company with Companies House), HMRC will know what salary you have been paid by the company. They get this information through your company payroll submissions under RTI (Real Time Information).
However, what HMRC will not know is how much money you have taken from the company in form of dividends. They will also need to know about any extra payments you have received in the form of rental income, trusts or other taxable forms of income.
How to Register for Self-Assessment by Deadline
Self-employed sole trader or partner:
To register for Self-Assessment by deadline dates as a sole trader, or in a business partnership, you’ll need to log on to the GOV.UK website and create a Government Gateway account and password. A User ID will then be generated. HMRC will subsequently request details about your business in order to set up an online account and prepare you the Self-Assessment online service. This is a simple process and should take anywhere between 10 to 15 minutes.
Within a few days of submitting your registration, HMRC will post a letter of acknowledgement to your company address containing your Unique Taxpayer Reference (company UTR number). This number must be provided in order to file tax returns. An Activation Code will also be sent to you shortly after you receive your UTR number. Use this code within 28 days in order to activate your online account and file Self-Assessment by deadline dates as listed above.
Limited company director
The process to fully register for Self-Assessment by deadline is slightly longer for company directors, but still fairly straightforward:
- Head to GOV.UK and complete the online form SA1.
- Within approximately 10 working days, you’ll receive your UTR number in the post. Note: this is not the same as the company UTR number.
- You can enrol online for Self-Assessment services by creating a Government Gateway account and password once your UTR number is received. A User ID will then be generated.
- You’ll receive an activation code within 10 working days.
- Activate your online account within 28 days by logging in with your User ID, password, and activation code when requested.
Once you complete the registration process, your tax and National Insurance liabilities will be calculated and to inform you of how much you have to pay upon returns completion.
Self-Assessment tax returns can be processed online or by post via form SA100. You can either do this yourself or appoint an accountant to complete the process for you.
With the right preparations, Self-Assessment filing can be a straightforward task. The earlier you can get your tax return completed and submitted the better.
Getting important tasks like this out of the way can give you great peace of mind. Plus filing as early as possible will guarantee that you won’t be subjected to late payment fines should you fail to meet your submission deadline.
If you want help with the Self-Assessment process, contact our professional and experienced company formations team, for a fast, friendly, and comprehensive service.