When you are self-employed or in employment your tax affairs dealt through “PAYE” (Pay As You Earn) or through self-assessment. Tax and national insurance are deducted from their pay, or paid on account to HMRC usually this is then the end of the matter. When you start a company by company registration it means you may not be looking after your own tax affairs, you are now the director of a limited company. As an owner/manager of a company it is expected your declare earnings and dividends by completing a self-assessment tax return annually.
The important thing to realise is that the onus is on you to contact HM Revenue & Customs (HMRC), and make them aware of your circumstances. The Government have recently increased HMRC’s powers and penalty regime, and there can now be hefty penalties for failure to register for self-assessment, filing a late tax return, and paying tax late. For example, a contractor in the construction industry could run up as much as £3,000 in penalties by failing to file the correct Returns in the first year of trading! Dealing with HM Revenue & Customs can be a difficult process. This has been made much worse by their budget cuts and structural changes, which have made it very time-consuming to speak to anyone, and almost impossible to speak to the same person twice.
On the flip-side, HMRC’s online system has been developed and improved to a stage where registering for self-assessment and completing a tax return for you and your company can both be done on the internet with relative ease. However, there are a couple of pitfalls.
Firstly, your company accounts and corporation tax return are filed online will not tell you if you have made a mistake, which can land you with penalties and interest if you underpay tax. Second, and particularly important your company accounts need to be filed in full with HMRC and in abbreviated form with Companies House in a set time frame. Getting a rejected filing in either case may result in severe penalties.
This is where accountants come in: Some accountants offer a free initial consultation, which should be able to establish whether you need to complete a tax return, at no cost to you. If you find that you do, then a good accountant should be able to take care of all tax matters for you. They should guide you through the registration process, advise you what records you need to keep, and prepare and file all necessary paperwork. They will also be able to tell you in good time what tax might be due and when. They will also explain each stage of the process to you.
Of course an accountant should keep you or your business compliant, helping you through the modern statutory minefield that is income tax, PAYE, VAT… They should provide you with peace of mind.
Taxation is complex, and we do recommend you seek professional advice from a professional accountant in your local area. We offer, along with your company registration, a free initial consultation with a TaxAssist Accountant local to your area to discuss the requirements of your newly formed company.
There are almost 200 TaxAssist Accountants offices in the UK offering local accountancy services to small businesses. Every TaxAssist Accountant operates as a small business accountant so they understand your companies’ accountancy needs.