Frequently asked questions
Do I need to register for Self Assessment?
You must register for Self Assessment if you had untaxed income, such as self-employment, rental income, dividends, capital gains, or if HMRC specifically asks you to file. HMRC’s current threshold for compulsory registration as a sole trader is over £1,000 trading income in a tax year (the Trading Allowance rule).
When do I need to register for VAT?
You must register for VAT if your VAT-able turnover exceeds £90,000 in any rolling 12-month period. You can also register voluntarily if it benefits your business (for example, if you incur VAT on expenses).
How much can I take from my limited company as a director?
Directors usually take a combination of: salary (through payroll) and dividends (from post-tax profits). Dividends can only be taken if the company has sufficient distributable profits. HMRC requires all salaries to be reported under RTI via payroll.
What expenses can I claim as a sole trader?
HMRC allows you to deduct expenses that are “wholly and exclusively” for business purposes. These commonly include travel (excluding commuting), home-office costs, professional fees, equipment, advertising, software, and stock. Mixed-use costs must be apportioned fairly.
What can I claim if I work from home?
HMRC allows two methods:
1. Flat Rate: A fixed amount per month depending on hours worked from home.
2. Actual Costs: A proportion of household bills such as heating, electricity, internet,
rent, council tax, and mortgage interest, based on reasonable apportionment.
When are corporation tax returns due?
The CT600 must be filed 12 months after the end of the accounting period. Corporation Tax payment is due 9 months and 1 day after year-end.
What records do I need to keep for HMRC?
HMRC requires you to keep business records for at least 6 years. This includes invoices, receipts, bank statements, payroll records, VAT returns, and any supporting documents.
Do I need to use accounting software?
For VAT-registered businesses, HMRC’s Making Tax Digital (MTD) rules require the use of MTD-compatible software for VAT submissions. For non-VAT businesses, software is optional (for now), but strongly recommended for accuracy and record-keeping.
What is CIS and do I need to register?
CIS (Construction Industry Scheme) applies to contractors and subcontractors in construction work. Contractors must register and deduct tax from subcontractor payments. Subcontractors can register to reduce deductions from 30% to 20%.