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Understanding Tax Requirements Accountant Samantha Senior details what new practitioners need to know about becoming selfemployed and registering for tax Tax season is here. The self-assessment tax return deadline for the last tax year is January 31; the end of this month. This means it’s perfect timing to discuss the responsibilities of a sole trader in regards to personal income tax when starting out in the medical aesthetics specialty. I am regularly approached by medical professionals who have invested in themselves through training as aesthetic practitioners. They often move from employed roles in the NHS and are taking the leap to become self-employed, which can be daunting for many. As life and work are busy, the formality of registering the new business gets pushed down the to-do list and often becomes a cause of anxiety and panic later down the line. The most common questions I get asked in my tax clinics are: • “How do I register my business?” Or “Help! I haven’t registered my business; will I get in trouble?” • Followed by, “Does THIS tax deadline affect me?” • “How much tax do I need to pay?” • And “What is making tax digital?” As an accountant, I meet many business owners that get completely overwhelmed by the concept of small business accounting and tax, so this article aims to help simplify the basic steps and advise those new to
the industry on what responsibilities lay with becoming a sole trader, while providing practical advice on when they should submit a self-assessment tax return.
Registering as a business Taking the leap from leaving employment and becoming self-employed needn’t be scary. A few simple steps and you’re ready to go. When starting out, the first step is to decide what type of business you want to be. In the UK, the simplest way to set up a business is to become a sole trader, also referred to as ‘self-employed’. The alternative is to set up as a limited company. Setting up as a limited company may be of benefit later down the line when your business grows, as it can be more tax efficient, but there is a lot more administration and responsibility with being a limited
company than a sole trader. As such, I generally recommend that becoming a sole trader is the easiest and most common route for newly-trained practitioners. There are a lot of free resources online, either at HMRC or the Low Income Tax Reform Group (LITRG), which is a charity that offer a free 108-page document on self-employment; as well as unlimited free resources.1 They both offer a wealth of advice on the advantages and disadvantages of being a limited company or a sole trader if you want to know more, or you can read Sole Traders vs. Limited Companies by Dr Qian Xu, which was published in the June 2018 issue of Aesthetics and is available online.2 For this article, however, I will focus on the responsibilities of sole traders. HMRC states that as a sole trader it is your responsibility to: • Keep records of your income and expenditure • Send a self-assessment tax return every year to HMRC • Pay income tax on your profits and Class 2 and Class 4 national insurance, if profits exceed the respective thresholds3 When you decide to become self-employed you are responsible for your own personal tax and national insurance. For these to be accounted for, you must register as self-employed. According to HMRC, ‘You must have done so by October 5 in your business’s second year and you could be fined if you are not’.3 A tax year runs from April 6 to April 5, therefore if you start your business in February 2019 you will have until the October 5, 2019 to register. If you start your business in June 2019, you have until the October 5 2020 to register. It’s simple to register as a sole trader; it just involves filling out a form on the gov.uk website.3 It can be completed by the individual running the business or by an accountant on behalf of the business owner.
Taking the leap from leaving employment and becoming selfemployed needn’t be scary
Reproduced from Aesthetics | Volume 7/Issue 2 - January 2020
