When starting up your own business, you want to make sure that you pay all your taxes on time.
When it comes to paying your first tax bill, the date will depend on:
- Your chosen format of the business
- The accounting date of the business
- What your profitability is like
- And any capital expenditure you have purchased, such as your office equipment
For more guidance, watch our video below.
Paying tax as a Sole Trader or Partnership
If you have started your business up as a Sole Trader or as a Partnership, you will declare your revenue, all your expenses, your profits, and your capital expenditure on your Self-Assessment Tax Return each year.
For a Sole Trader or Partnership, your year will always run from 6 April to 5 April.
You will then have until 31 January the following year to submit your tax return online and pay your liability.
If you want to submit your return by paper, you will only have until 31 October following the year end to file the return. So it’s best to do it online!
So, how does that work in practice? For example, if you started trading on 1 May 2018, your first year of trading would run until 5 April 2019. You will then have until 31 January 2020 to submit your return online and pay your liability.
Paying tax as a Limited Company
For companies, the annual accounts are submitted to Companies House and the Corporation Tax return is submitted to HMRC.
If you have taxable profits over £1.5 million you must normally pay your Corporation Tax for that period electronically in instalments.
If you have taxable profits of up to £1.5 million the deadline for your tax return is 12 months after the end of the accounting period it covers. There is a separate deadline to pay your corporation tax bill and it is usually 9 months and 1 day after the end of the accounting period.
The only exception to this is in your first year of trading, when you may have two accounting periods, if the accounting period is longer than 12 months.
For example, if you set up your business on 1 May 2018 your year end would usually be 31 May 2019. The first accounting period is a 12 month period of 1 May 2018 to 30 April 2019, and a second shorter accounting period of 1 May 2019 to 31 May 2019. Then, going forward, the accounting periods will run from 1 June to 31 May.
In the first year of trading your accounts are due 1 year and 9 months after the incorporation of the company.
Using the example above, the first year accounts cover two accounting periods from 1 May 2018 to 31 May 2019. The accounts and corporation tax are due 1 year and 9 months after the incorporation, so 1 February 2020.
When you file your tax return you work out your profit or loss for corporation tax and corporation tax bill. You can either get an accountant to prepare and file your tax return or do it yourself.
File your returns as soon as possible
Whether you have set up as a sole trader or a limited company, it is always best to prepare your accounts as soon as you possibly can after the end of your financial year, so you can prepare for any liabilities.
In summary, you want to be prepared with your tax returns as early as possible to avoid any fines. You should save these submission deadlines in a calendar and make sure you are aware of any additional expenses you can claim for tax relief.
If in doubt, ask an accountant – it is what they do on a daily basis.