When Do You Need to Register Your Business With HMRC

Starting a new business in the UK is both exciting and challenging. Even with a solid business plan, a strong product or service, and a reliable marketing strategy, you must also register your business with HMRC (HM Revenue & Customs) for tax purposes.

Getting registered will ensure legal compliance and help you avoid penalties. In the following sections, we explain when you need to register your business with HMRC and how to go through the process.

Registration Requirements for Different Business Structures

As a new business owner, you can choose from several different business structures in the UK, including sole trader, partnership, and limited company. 

Each of these structures has different rules and requirements. 

Here’s everything you need to know. 

Sole Traders

The majority of small businesses in the UK prefer to register as self-employed and operate as sole traders, at least in the beginning of their journey. This is especially the case for those in low-risk niches or those working from home and providing freelance services. 

When Do You Need to Register as Self-Employed?

The good news is that you can begin trading without registering. However, if your business income exceeds £1,000 in a tax year (6 April to 5 April), registration with HMRC becomes mandatory. It’s key that you register by 5 October, following the end of the tax year in which you started trading. Failing to do so can cause financial penalties and other legal conflicts. 

Sole trader businesses are the simplest to register and manage. However, there are a few specifics to consider. 

Personal Liability as a Sole Trader

Under a sole trader business, the business owner and the business itself are considered the same entity. 

This means that as an owner, you’ll be personally responsible for your business’s debts and any accumulated losses. 

Tax Responsibilities for Sole Traders

You’ll be obliged to submit an annual self-assessment tax return and pay your own tax. Unlike in other business structures, as a sole trader, you’re only required to pay Income Tax and not Corporation Tax. 

To ensure you’re staying on track with your tax, you can use an online calculator provided by HMRC to help you budget for your tax payments. Make sure you keep your records for at least 5 years after the January 31 submission deadline of the relevant tax year. 

VAT and Making Tax Digital (MTD)

Depending on whether your business is VAT-registered, you may also be expected to pay additional taxes. 

Making Tax Digital (MTD) for VAT has been a legal requirement for all VAT-registered businesses since 1 April 2022, marking a major step toward the UK government’s goal of a fully digital tax system. The next phase of this initiative, MTD for Income Tax Self Assessment (ITSA), is set to take effect in stages starting from 6 April 2026.

Initially, from 6 April 2026, MTD for Income Tax Self Assessment (ITSA) will apply to individuals with qualifying income over £50,000 from self-employment and/or property (including landlords). Qualifying income refers to the combined gross income from these sources.

From 6 April 2027, the requirement will extend to those with qualifying income over £30,000, and HMRC has set out plans to further expand the regime to individuals with qualifying income over £20,000 from April 2028.

National Insurance Contributions (NICs)

As a sole trader, you’ll need to determine whether you’re liable to pay National Insurance contributions (NICs). 

From 6 April 2024, most self-employed individuals no longer have to pay Class 2 NICs. If your profits are above the Small Profits Threshold, Class 2 is treated as having been paid to protect your entitlement to certain state benefits.

If your profits fall below the threshold, you can choose to pay voluntary Class 2 contributions to maintain your benefit entitlements. In addition, if your profits exceed the relevant limit, you may be liable to pay Class 4 NICs. In most cases, National Insurance contributions are calculated and paid through your Self Assessment tax return.

Profit, Control and Banking

As a sole trader, you’ll be able to keep all of your business profits after paying tax and National Insurance. You’ll also be in full control over any business decisions, unlike in the case of registering a partnership. 

Although not mandatory, it’s highly recommended that you open a separate business bank account to distinguish between personal and company finances. 

Sole Trader Responsibilities at a Glance

In a nutshell, sole traders must:

• Register with HMRC once business income exceeds £1,000 in a tax year;
• Submit a Self-Assessment tax return every tax year;
• Pay Income Tax and potentially Class 2 or Class 4 National Insurance based on your profits;
• Keep financial records for at least 5 years after the 31 January tax deadline;
• Be personally liable for business debts or liabilities.

Don’t forget that as a sole trader you’ll be personally responsible for setting up all company accounts and keeping business records. Alternatively, you can hire a professional and outsource this part of your business. 

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Partnerships

Unlike with sole trader businesses, registering a partnership makes sense when there are two or more people who will be sharing the responsibility of running the business. In fact, it’s a legal requirement that there are at least two people in a partnership. In this case, profits, losses, and decision-making will be shared. 

Although this structure is usually associated with less control, it’s also one that guarantees better financial support from several owners. All of the details regarding the profit and loss distributions are usually outlined in a written document called a partnership agreement or partnership deed. 

In the UK, you can also register a Limited Liability Partnership, where partners enjoy the advantages of a limited liability while at the same time profits are shared in a flexible way. When it comes to registration, Limited Liability Partnerships must be registered in both Companies House and HMRC, while a standard Partnership only requires HMRC registration.

In a partnership, each partner is obliged to register for self-assessment and pay their individual self-assessment tax returns. At the same time, a “nominated partner” must be appointed. This individual will be responsible for registering the company with HMRC,  submitting the partnership’s tax return, and managing business records. 

Overall, when registering a partnership, you must:

• Register with HMRC;
• Appoint a nominated partner;
• Make sure each partner is registered for Self Assessment;
• Submit a partnership tax return to HMRC every year and a personal tax return by each partner;
• Pay Income Tax and National Insurance;
• Keep business records.

Remember to familiarise yourself with the specific requirements for different types of partnerships in the UK. 

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Limited Companies

The third type of business structure you can set up is a limited company. One of the most important things to remember about limited companies is that they’re considered a separate legal entity, creating a distinction between personal assets and business assets. 

In other words, personal assets are protected, guaranteeing peace of mind for business owners. 

Due to this separation, you’ll need to register the business with Companies House,  the official business registrar of companies, before commencing business activities. After registering with Companies House, it’s obligatory to register for Corporation Tax with HMRC. 

There are a few important things to remember when registering with Companies House: 

First, you’ll need a registered business address, which will appear on public records. Remember, this address cannot be a P.O. box. While it can be your home address, note that this means your personal address will be publicly visible on the Companies House website, affecting your privacy. 

You’ll also need a business name that ends in “Limited” or “Ltd”, or the Welsh equivalents “Cyfyngedig” or “Cyf”. When selecting your business name, ensure the name is available and not already taken by another business name or trade mark.

Once registered with Companies House, you’ll be able to begin trading. You have three months after being incorporated with Companies House to register with HMRC. 

To register your limited liability company, it’s essential that you appoint at least one named director who will hold legal responsibility for the business and manage things like organising company accounts. Moreover, it’s key that all shareholders sign a memorandum and articles of association, agreeing on how the business will be run. 

Limited company directors must file annual accounts with Companies House, submit a confirmation statement, and file Corporation Tax returns with HMRC. In addition, directors are required to submit a personal tax return for any taxable untaxed income. 

As a limited company, you can also hire employees and become a legal employer in an attempt to grow your business. Although this means providing workplace pensions and taking on extra responsibility, it also means potentially lowering your tax bill. The overall tax bill can also be decreased when you pay dividends from the company's profit. 

In short, limited liability companies must:

• Register with Companies House before trading;
• Choose a registered business address;
• Receive a Certificate of Incorporation from Companies House;
• Register for Corporation Tax with HMRC within 3 months of trading;
• File annual accounts with Companies House;
• Submit a confirmation statement at least once a year;
• Pay Corporation Tax on business profits;
• Keep accurate business and financial records.

While registering a limited company often seems complex and burdensome because of the numerous legal documents and detailed record-keeping, it’s a safe way to operate a business with fewer personal liabilities. 

Special Considerations

Apart from the foundations that we shared above, there are a few special considerations worth addressing.

For example, if you have a side online business or a side hustle that you don’t necessarily consider a business, make sure you follow the rules. If your income exceeds £1,000, registering is a must. 

Keep in mind that some online platforms can report user earnings to HMRC, so the importance of compliance becomes even bigger. 

Another special consideration is VAT or Value Added Tax. Companies whose total taxable turnover for the last 12 months is more than £90,000 are legally obliged to register for VAT. VAT registration is also available for companies with a lower turnover, potentially leading to benefits for businesses. 

It’s highly recommended to register for VAT when it’s forecasted to reach the threshold to avoid penalties. 

Steps to Register Your Business

Now that we’ve covered the basics, it’s time to go through the actual process of registering a company with HMRC.

When you register a business, there will be a few differences in the process based on the type of structure you’ve selected. However, the procedure is very similar for all types of businesses.

Here’s a step-by-step overview of how to register a business in the UK.

No matter whether you’re setting up as a sole trader, limited company, or partnership, the registration process in the UK starts on the official GOV.UK website. Registering early is essential - it allows you to open business bank accounts, receive formal recognition from HMRC, and avoid issues with tax deadlines and National Insurance.

Sole traders must register for Self Assessment by 5 October following the end of the tax year for which a return is needed (in other words, the first year they have reportable income), while limited companies need to register with Companies House before they start trading.

Online registration takes about an hour. Before you begin, make sure you understand the rules for your business type and that you have the right details ready.

You’ll be asked to provide:

• Business or trading name;
• Official business address or registered office address for limited companies;
• Contact details (email and phone number);
• Business structure (sole trader, limited company, or partnership);
• Details of directors, shareholders, or partners (if applicable);
• National Insurance number (for sole traders and partnerships).

After registration, HMRC will send your Unique Taxpayer Reference (UTR) by post. You’ll need this number whenever you handle tax matters for your business.

You’ll then need to register for VAT considering you meet the threshold. 

Limited companies and LLPs must register with Companies House first, and only then can they apply for VAT through HMRC. In contrast, sole traders and traditional partnerships skip Companies House entirely and register directly with HMRC. When applying for VAT, you’ll be asked to provide information about your business - including projected turnover, the nature of your activities, and your bank account details.

You can apply for VAT online via the HMRC website. Once registered, HMRC will issue a VAT number, which must appear on your invoices and financial paperwork. This number confirms your VAT status and enables your business to reclaim VAT on qualifying expenses.

After registering your business, you can set up your financial infrastructure. This may include opening a business bank account or applying for a UK merchant account if you need to accept debit or credit card payments.

Conclusion

Running your own business also means being responsible for ensuring legal compliance. By understanding the specific requirements associated with your business structure, you can successfully fulfil your obligations and concentrate on growing your company. 

We hope that this guide will help you get through the registration process quickly and easily, with zero disruptions to your business. 

Frequently Asked Questions