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Running a small business in the UK is exciting. You’re the boss, the dreamer, and the doer! But when tax season comes around, things can get a little… confusing. Don’t panic—filing taxes doesn’t have to be a nightmare. We’re here to break it down nice and easy.
TL;DR (Too Long, Didn’t Read)
Filing taxes for your small UK business isn’t as scary as it seems. Start by knowing your business type, track all income and spending, and file your returns on time. Use online tools when possible and don’t ignore HMRC deadlines. When in doubt, get help from an accountant or advisor.
1. Know Your Business Type
First things first—what kind of business do you run? The UK recognises a few types, each with its own tax rules:
- Sole Trader: You run the business by yourself and keep all the profits (after tax). Simple and common.
- Partnership: You share the business with one or more partners.
- Limited Company: A separate legal entity. More paperwork, but also more protection.
Most small startups begin as sole traders. If that’s you—great, this guide is perfect. If you’re running a limited company, things are a bit more complex, but we’ll still help you.
2. Register With HMRC (Asap!)
As soon as you start earning as a business, you must register with HMRC. This tells the government you’re self-employed or running a company.
Deadlines matter: You must register by 5 October in your business’s second tax year. Example: You started selling candles in June 2023 — you must register by 5 October 2024.
3. Keep Good Records
This is key. Keep track of everything: what you earn, what you spend, and proof of each transaction.
Here’s a list of things to keep:
- Sales invoices
- Receipts for purchases
- Bank statements
- Mileage logs (if driving for work)
- Payroll (if you have employees)
Use spreadsheets, apps like QuickBooks, FreeAgent, or even good ol’ shoeboxes (kinda joking). Just make sure it’s organised!
4. Know What Taxes You Owe
Depending on your setup, you may need to pay different types of taxes:
- Income Tax: Paid on your profits if you’re a sole trader or in a partnership.
- Corporation Tax: If you’re a limited company.
- VAT: Only if your revenue hits £85,000+ per year.
- National Insurance: Both for you and your employees (if any).
- PAYE: If you pay salaries.
- Dividends Tax: If you’re a company owner paying yourself dividends.
Don’t let this list scare you. Most solo businesses just need to worry about Income Tax and NI to start with.
5. Understand the UK Tax Year
UK tax years go from 6 April to 5 April each year. Weird, we know.
After the tax year ends, you have until 31 January to submit your tax return and pay any tax due. Miss it and… hello late penalty!
6. File a Self Assessment Tax Return
If you’re self-employed, you need to file a Self Assessment each year on the HMRC website.
Your tax return will include:
- Details of your income
- Allowable business expenses
- Any tax you’ve already paid (like through PAYE)
- Total profit/loss
Good news: it’s mostly clicking through boxes online. But make sure numbers are correct!
7. What Can You Claim as Expenses?
Here comes the fun part: what can you deduct from your tax bill?
Here are some allowable business expenses:
- Office supplies
- Travel (trains, petrol, parking)
- Business phone and internet
- Marketing costs
- Software subscriptions
- A portion of home office costs
If it helps you run your business, and it’s not for personal use—it might be deductible.
8. Pay Your Tax
There are several ways to pay:
- Direct Debit
- Online banking transfer
- Debit card
Pro tip: Set aside 20%-30% of your income throughout the year in a separate savings account for tax. Prevents any painful surprises later.
9. Watch Out For Payments on Account
This one catches many people out.
If you owe over £1,000 in tax, HMRC asks you to pay in advance for next year too—called “payments on account.” You’ll pay:
- 50% of this year’s tax bill in January
- Another 50% in July
Plan ahead for this! It’s like pre-paying for next year’s Netflix… only less fun.
10. Go Digital with “Making Tax Digital” (MTD)
HMRC is rolling out Making Tax Digital for many business types. This means:
- Your records must be digital
- You’ll submit quarterly updates
It’s already required for VAT-registered businesses. Eventually, all small businesses will need to follow it. Time to get friendly with spreadsheets or clever software.
11. Get Help If You Need It
You don’t need to do this alone! If you’re feeling overwhelmed, consider:
- Hiring an accountant
- Using online tax tools or calculators
- Watching HMRC’s free webinars
Sometimes paying a pro saves you money in the long run (and your sanity).
Quick Tips for Tax Success
- Keep records all year—don’t wait till January
- Set reminders for key deadlines
- Save monthly for tax
- Ask for help if you’re confused
- Use tools like Xero or QuickBooks
You’re in Control!
Taxes aren’t always fun—but they don’t have to be terrifying. With the right tools and a bit of know-how, you can file your UK small business taxes like a pro.
Take it one step at a time, stay organised, and don’t be afraid to ask questions. You’ve got this!
Now go treat yourself to a cuppa—you earned it 🍵.
