Do I need to register my business once I have taken the road to launch and carry out my business affairs? In the UK, every business needs to be registered either with the Companies House or HM Resources & Customs (HMRC) or both, depending on the type of business.
Registering your business at the early stage of setting up your business may save you from the registration process and the taxation hurdles in the later stages of doing business. So, if you are selling products or selling your services while hiring more employees, you must consider registering your business without wasting any time.
In this blog, we will share with you what business registration is in the UK and why it is important. Moreover, we will discuss the registration process with HMRC and the Companies House. Besides, we will touch upon the types of businesses and their registration processes. So, let’s delve into the discussion!
Types of Businesses in the UK
Basically, three types of businesses are set up in the United Kingdom. All small-scale and large-scale businesses fall into the following three categories:
- Limited Company
- Sole Trader
All of the above business types have different registration processes and need to register with different legal entities to ensure their business is a legal entity and pay the right amount of taxes and pay them on time.
What is Business Registration in the UK?
Different types of business setups are supposed to get registered with the Companies House or HMRC. Companies House ensures you have a ‘Certificate of Incorporation’ with a unique business name, number and date of formation.
There’s no registration fee if you register your business with the Companies House online as per the Companies Act 1985 or the Companies (Northern Ireland) Order 1986. However, you will be charged a fee if you want to re-register, incorporate another business or rename your business.
On the other hand, your business should be registered for the Corporation Tax or PAYE to file tax returns as an employer.
There were approximately 4 million companies registered in the UK by the end of March 2021 and this number is continuously increasing at a rate of 8.4% when compared with the previous year of 2020.
Why Do I Need To Register My Business?
If you register your business in the UK, it means your business is legally recognized and can enjoy the privileges and certain claims, following the rules set by the UK government. On the other hand, you will manage your taxes smartly and timely. Let’s now move towards the registration of different types of businesses!
Registration of a Limited Company
A limited company is a type of business where a company is a separate legal entity from the personal finances of the person who owns and manages it. So, if you are setting up your limited company, you will be required to register for the Companies House, HMRC and VAT.
You can register for both the Companies House and the Corporation tax at the same time. If it is not possible, you can apply for corporation tax later at the HMRC online or by hiring a professional or using third-party software.
For this, you must register for the corporation tax within three months of setting up your business. You will get a Unique Taxpayer Reference (UTR) from the Companies House after 14 days of registration and you can use it to sign in to your business account at the HMRC. Use this information to create a new account or log in to your account. After that, you can register your business for the Corporation Tax.
For this, you need your business registration number, the date of setting up your business and setting up your annual accounts.
HMRC will provide you a unique 10-digit UTR number you can use to pay your corporation taxes after the registration process is complete.
Register Your Business as a Sole Trader
If you are the sole owner of your business and you are not hiring any employees to carry out the business affairs, you must register your business as a sole trader with HM Revenues & Customs (HMRC). However, you don’t need to register your business with the Companies House as a sole trader.
A sole trader is ready to register his business if he fulfills the following criteria:
- You earned at least £1,000 between 6 April 2021 and April 5 2022.
- You manage all your business records and expenses as you are self-employed
- You are registered as self-assessment with HMRC
- You manage your Self-Assessment tax returns by the end of every tax year.
- You pay your Income Taxes on your profits
- You have registered your business for National Insurance voluntarily
- You make use of the Class 2 and Class 4 National Insurance Calculator set up by HMRC
- You have registered your business for Value Added Tax (VAT) voluntarily, specifically, if your turnover crosses a whopping figure of £85,000
You can apply online and get your business registered with HMRC. You do not need any specific business name as it is in the case of a limited company. You can use any business name on your documents. Moreover, you must be a resident of the UK and provide identity documents to apply for the National Insurance and Self-Assessment tax returns.
Apply online for the Self-Assessment registration using your business tax account or by post. You will receive a particular UTR code to sign in. You can calculate, view and send tax returns for the first time using this account. On the other hand, if you have filed your tax returns last year, re-register for Self-Assessment using the same UTR identity number to send your tax returns this year.
Register Your Partnership Business
Just like sole proprietors, a business based on a partnership is not required to register its name and business with the Companies House. The business must be registered at HMRC to make the tax returns. In a business partnership, many shareholders share the business responsibilities, profits and losses on the agreed terms and conditions. However, each partner pays income taxes on the income received from the partnership.
A business built upon the idea of a partnership must be registered with HMRC to manage its businesses immaculately. A business partnership nominates a partner who manages the business records and the tax returns on the behalf of the company. The partners may comprise many individuals or many limited companies.
- Moreover, you need to register your business as a trademark
- Register your business for VAT. This registration is optional and the partners can register their business for VAT voluntarily.
- Moreover, your business must select a ‘Nominated Partner’
- Get a Self-Assessment Registration with HMRC
- The ‘nominated partner’ will send partnership tax returns and the ’individuals’ will send their tax returns individually on their own incomes.
- The deadline for the registration is 5th October of the second year of your tax year. If a partnership fails to register its business on time, it will be penalized.
Lastly, every business in the UK needs to register to get legal status and make their tax returns transparent and manage the tax records effectively. All three types of business must be registered with HMRC. However, public limited companies are supposed to register with the Companies House as well.
On the other hand, you can also register your business for VAT and National Insurance. If you are hiring people to manage your business, you can register for National Insurance. If you are self-employed, you can apply for National Insurance voluntarily. In short, if you ask the question of ‘Do I need to register my business?’ The answer is ‘Yes’ and this guide helps you register at the initial stages of setting up your business.
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Disclaimer: This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances.