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Legal Considerations When Registering Your New Business With HMRC   

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Starting a new business is an exciting endeavour that requires careful planning and execution. However, one crucial step in establishing your business in the UK is registering it with His Majesty’s Revenue and Customs (HMRC). Registering your business with HMRC is essential for complying with tax laws and ensuring a smooth financial journey for your venture. This article highlights five legal considerations for registering your new business with HMRC. From understanding the registration process to complying with tax obligations, these considerations will help you navigate the process and set your business up for success.

1. Understand the Types of Business Structures

Before registering your business with HMRC, it is vital to determine the most suitable business structure for your venture.

In the UK, common business structures include: 

  • sole traderships; 
  • partnerships; and 
  • limited companies.  

If you are a sole trader, you will register as self-employed and be personally responsible for all aspects of your business. Partnerships involve multiple individuals sharing the responsibilities and profits. In comparison, a limited company is a separate legal entity offering limited liability to its owners.

Each structure has different legal and tax implications, so choosing the one that aligns with your business goals and future plans is crucial.

2. Obtain a Unique Taxpayer Reference (UTR)

Once you have decided on your business structure, you must obtain a Unique Taxpayer Reference (UTR) from HMRC. The UTR is a ten-digit number unique to your business and essential for your tax affairs.  

You can register for a UTR through the HMRC website or by calling their helpline. When applying for a UTR, you must provide personal information, such as your: 

  • name;
  • address; and 
  • National Insurance number.

Additionally, you must provide details about your business, including its: 

  • structure;
  • start date; and 
  • anticipated income.
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3. Register for Appropriate Taxes

Registering your business with HMRC involves identifying and registering for the relevant taxes based on your business structure.

Let us explore some common taxes you may need to register.

Self-Assessment

If you are a sole trader or partner, you will likely need to complete a self-assessment tax return each year. Registering for self-assessment ensures you pay income tax on your business profits.

Corporation Tax

Limited companies must register for Corporation Tax within three months of starting their business. Corporation Tax is levied on company profits.

Value Added Tax (VAT)

If your business’s annual turnover exceeds the VAT threshold, you must register for VAT. VAT is a tax added to the price of most goods and services in the UK.

Pay as You Earn (PAYE)

If you plan to hire employees, you should register for PAYE. This tax system deducts income tax and National Insurance contributions from your employees’ salaries.

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4. Keep Accurate Financial Records

Maintaining accurate financial records is crucial for complying with HMRC’s regulations and understanding your business’s financial health.

As a business owner, keeping track of your income, expenses and tax obligations is essential. Consider implementing an efficient record-keeping system like cloud accounting software to streamline your financial processes.

Your financial records should include invoices, receipts, bank statements, and other relevant documents. Keeping organised records will save you time when preparing your tax returns and facilitate smooth communication with HMRC if your business records are audited.

5. Seek Professional Advice

Registering your business with HMRC involves complex legal and tax considerations. To ensure you comply with the law and to optimise your financial situation, it is advisable to seek professional advice from an accountant or expert lawyer. They can guide you through the registration process, help you understand your tax obligations, and provide valuable insights into optimising your business’s financial performance.

Key Takeaways

Registering your new business with HMRC is crucial in establishing your presence in the UK’s business landscape. You can navigate the registration process by understanding the different business structures, obtaining a Unique Taxpayer Reference (UTR), registering for appropriate taxes, keeping accurate financial records, and seeking professional advice.

Complying with HMRC’s requirements ensures that you meet your tax obligations and avoid potential penalties. By starting your business on the right foot and establishing a solid foundation with HMRC, you can focus on growing your venture and achieving long-term success.

If you need legal assistance registering your new business with HMRC, our experienced business sale lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page

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