Self Employed

Self Employed

All self-employed individuals have a legal responsibility to register for self-assessment. A tax return must be completed for the tax year in which the self-employed individual received income.

Example: If John the Plumber commenced trading in March 2016 he must complete a tax return (after registering with HMRC) for the tax year commencing 6th April 2015 and ending 5th April 2016. Despite the fact, he was only running his own business for one month he still has to declare all income and expenses for the full tax year.

This may mean he has to complete employment or other supplementary pages that are relevant to his own circumstances. If he fails to do so or fails to register within three months of commencing trading HMRC may issue a penalty fine of £100.00. Often an individual will receive a tax repayment if they have commenced trading in the latter period of the financial year.

This is due to the fact that they have substantial start-up costs which may result in a loss in trading profits in the first year. These business losses can be offset against other income such as employment income and the net result may be a significant tax repayment. An obvious example is a hairdresser who has spent monies refurbishing a hair salon and purchasing equipment and stock prior to opening.

If this has happened in March or February, there may be a low income in the first few months of trading which will result in a loss at year end.

These losses can be offset against certain other income. We offer a tax return service for all types of self-employment in every type of business. Please feel free to contact our tax team at any time.