Accounting questions, straight answers.

You generally need to file if you were self-employed as a sole trader and earned more than £1,000, were a partner in a business partnership, or received untaxed income such as rental profits, dividends or savings interest that HMRC cannot collect through your tax code. You also need to file if you had to pay the High Income Child Benefit Charge, made capital gains above the annual exempt amount, or your only income is from PAYE but exceeds £150,000. If you are unsure, HMRC's online checker will confirm your position, and registering by 5 October following the end of the tax year keeps you penalty-free.

First register with HMRC to obtain your Unique Taxpayer Reference and activate your online account, then gather your income records, expenses, P60 or P45, and details of any savings, dividends or rental income. You complete the relevant supplementary pages online (for example the self-employment or property pages), claim your allowable expenses and reliefs, and the system calculates your bill automatically before you submit. The online deadline is 31 January after the end of the tax year, and we'd always suggest starting early so you have time to find any missing figures.

You can pay HMRC by Faster Payments, debit card, online or telephone banking, or by setting up a Direct Debit through your online account, with bank transfers usually clearing the same or next day. The balancing payment for a tax year is due by 31 January, with a second payment on account, if applicable, due by 31 July. Always quote your Unique Taxpayer Reference followed by the letter K as the payment reference so HMRC allocates it correctly.

If your Self Assessment bill is more than £1,000 and less than 80% of your tax is collected at source, HMRC asks you to make payments on account towards the following year. This means your first 31 January demand can include the full balancing payment for the year just ended plus a first instalment of 50% towards the next year, with a second 50% instalment due by 31 July, so you can feel like you are paying around 150% in one go. It is a one-off timing effect rather than extra tax, and if you expect lower profits you can apply to reduce the payments on account.

Yes, if you cannot pay your Self Assessment bill in full you can usually spread the cost through a Time to Pay arrangement, and many taxpayers who owe up to £30,000 can set this up online without speaking to HMRC, provided their returns are filed and they are within 60 days of the deadline. Larger debts can still be arranged by calling HMRC's payment support line. Interest still accrues on the outstanding balance, so it is sensible to clear it as quickly as your cash flow allows.

Yes, all your income is taxable, but you only have one Personal Allowance of £12,570, which is normally set against your main job, so a second job or side income is typically taxed in full at your marginal rate. For employed second jobs this is handled through your tax code, while self-employed side income over the £1,000 trading allowance must be declared on a Self Assessment return. Bear in mind that combined earnings can push part of your income into the 40% higher-rate band above £50,270.

An SA302 is HMRC's official tax calculation summarising your declared income and the tax due for a given year, and lenders often ask for it alongside a tax year overview to verify self-employed income for a mortgage. You can print both documents from your HMRC online account once your return has been submitted, usually needing the last two or three years. Most lenders now accept these self-printed versions, so there is no need to request paper copies from HMRC by post.

Basis period reform changed how trading profits are taxed so that, from the 2024/25 tax year onwards, sole traders and partnerships are taxed on the profits arising in the tax year itself rather than on their accounting year end. It only affects you if your accounting date is not aligned with the tax year (broadly not between 31 March and 5 April); businesses already using a 5 April or 31 March year end are unaffected. If you were caught by the transition in 2023/24, any resulting transition profit is spread over five years to 2027/28, so you may still see an adjustment on your returns.

Emergency tax codes (such as those ending W1, M1 or X, or a BR code) often apply when you start a new job or take a pension without a P45, and they can mean too much tax is deducted because your full personal allowance of £12,570 isn't being applied. In most cases HMRC corrects this automatically once your new employer reports your details through PAYE, and any overpayment is refunded through your wages in a later payslip. If you've stopped working or it isn't resolved by the end of the tax year, you can claim the refund directly through your Personal Tax Account or by contacting HMRC. Keep your P45 or starter checklist to hand, as supplying the correct details is usually what fixes it fastest.

Your tax code tells your employer how much tax-free pay you're entitled to, and for most people on the standard personal allowance of £12,570 it will be 1257L for 2026/27. Signs it may be wrong include a BR, D0 or 0T code when this is your only job, a code with W1/M1/X attached, or a sudden change in your take-home pay without explanation. Check the coding notice HMRC sends you and make sure any benefits, second incomes or underpayments listed actually apply to you. If something looks off, contact HMRC to have it corrected, as an incorrect code can leave you paying too much or building up an unexpected bill.

A P60 is an end-of-year summary your employer must give you by 31 May, showing your total pay and the tax and National Insurance deducted through PAYE for the tax year just ended. You need it as proof of income and tax paid, which is useful when applying for a mortgage or loan, claiming a tax refund, or completing a Self Assessment return. If you have more than one job, you'll receive a separate P60 from each employer. Always keep your P60s safe, as HMRC recommends retaining them for at least several years in case you need to query your record.

A P45 is the document you receive when you leave a job, showing your pay and tax to your leaving date so your next employer can apply the correct tax code. A P60 is an annual summary given by your current employer after the tax year ends, confirming your total taxable pay and deductions for that year. A P11D is a separate form your employer files where you receive taxable benefits in kind, such as a company car or private medical insurance, so the right tax can be collected. In short, the P45 covers leaving, the P60 covers the year-end position, and the P11D covers non-cash benefits.

If you're employed, student loan repayments are deducted automatically from your salary through PAYE once your income exceeds the threshold for your plan type. For 2026/27 the annual thresholds are £26,900 for Plan 1, £29,385 for Plan 2, £33,795 for Plan 4 and £25,000 for Plan 5, with repayments at 9% of earnings above the threshold; Postgraduate Loans repay at 6% above £21,000. Deductions are calculated on each pay period rather than your annual salary, so overtime or a bonus can increase a single month's repayment. You'll see the amount shown separately on your payslip, and it's important your employer knows your correct plan type to avoid under- or over-deducting.

Salary sacrifice is an arrangement where you agree to give up part of your gross salary in exchange for a non-cash benefit, such as additional pension contributions, an electric car or the cycle-to-work scheme. Because the sacrificed amount is taken before tax and National Insurance, you reduce both, which can make pension saving in particular more efficient than contributing from net pay. Bear in mind that lowering your gross salary can affect things like mortgage borrowing, statutory maternity pay and other earnings-linked entitlements, so it's worth weighing the trade-offs. Any arrangement must be a formal change to your contractual pay rather than a deduction shown after tax.

Yes, employees can claim tax relief on certain costs incurred wholly for their job that aren't reimbursed by their employer, including cleaning a required uniform, replacing specialist tools, and business mileage in your own vehicle. Mileage relief is based on the approved rates of 55p per mile for the first 10,000 business miles and 25p thereafter, so if your employer pays less than this you can claim relief on the difference. For uniforms and tools, HMRC offers flat-rate allowances for many occupations, or you can claim actual costs if you keep receipts. You can usually claim for the current year and the four previous tax years through your Personal Tax Account or Self Assessment.

This is an area where the rules have changed: from 6 April 2026 the tax relief that previously allowed employees to claim a flat £6 a week for additional household costs of working from home has been withdrawn, so it is no longer available for the 2026/27 tax year. Employers can still reimburse genuine additional homeworking costs free of tax and National Insurance, and may pay up to £6 a week towards them without records, so it's worth asking whether your employer offers this. The self-employed are treated differently and can continue to claim a proportion of home running costs against their business profits. If you're unsure how the change affects your position, it's sensible to take advice.

A limited company pays corporation tax on its profits, charged at 19% on profits up to £50,000, 25% on profits over £250,000, and an effective tapered rate in between thanks to marginal relief. On top of that, if your taxable turnover exceeds the £90,000 VAT registration threshold you must register for and charge VAT, and if you employ anyone (including yourself on a salary) the company pays employer's National Insurance and operates PAYE. The taxes you personally pay on the money you draw out, such as dividend tax, are separate from the company's own liabilities.

As a director-shareholder you typically pay yourself through a combination of a modest salary run through PAYE and dividends paid from the company's after-tax profits. Many owners take a salary up to around the £12,570 personal allowance to keep it tax-efficient and preserve their state pension record, then top up their income with dividends. You can also be reimbursed for legitimate business expenses and make employer pension contributions, both of which are tax-deductible for the company.

For most owner-managed companies a low salary plus dividends remains more tax-efficient than a large salary, because dividends are not subject to National Insurance. However, the gap has narrowed for 2026/27 as dividend tax rates have risen to 10.75% for basic-rate taxpayers and 35.75% for higher-rate, with the additional rate at 39.35%, and only the first £500 of dividends is tax-free. The optimal split depends on your total income, the £5,000 employer NI secondary threshold and whether your company can claim the £10,500 Employment Allowance, so it is worth modelling each year rather than assuming last year's answer still holds.

Each time you declare a dividend you should hold a board meeting (even if you are the only director) and keep minutes recording the decision, then issue a dividend voucher to each shareholder. The voucher must show the date, the company name, the shareholder's name and the amount of the dividend paid. Crucially, you can only pay dividends out of distributable profits, so keep management accounts showing sufficient retained profit existed at the date of declaration, otherwise HMRC can treat the payment as an unlawful dividend or a director's loan.

Under the Companies Act 2006 you must act within your powers, promote the success of the company, exercise reasonable care and skill, and avoid conflicts of interest. Practically, this means filing your annual accounts and confirmation statement with Companies House on time, filing the company's corporation tax return and paying the tax due, keeping proper accounting records for at least six years, and keeping the company's registers up to date. You are also responsible for ensuring the company does not trade while insolvent, as continuing to incur debts you cannot repay can lead to personal liability.

The most common legitimate reductions come from claiming all allowable business expenses, making employer pension contributions for directors, and using capital allowances such as the Annual Investment Allowance and full expensing on qualifying equipment. You can also claim relief for items like R&D where the work qualifies, ensure the timing of expenditure and dividends is planned around your year end, and carry losses forward or back. The key is that everything must be commercially genuine and properly documented, so it is worth taking advice before year end rather than after, when most opportunities have passed.

Corporation tax is due nine months and one day after the end of your company's accounting period, which is normally before the deadline for filing the corporation tax return itself, which falls twelve months after the period end. So a company with a 31 March year end must pay by 1 January and file by the following 31 March. Larger companies with profits over £1.5 million pay in quarterly instalments instead, and HMRC charges interest on anything paid late, so it pays to set the money aside in advance.

A confirmation statement (form CS01) is an annual filing to Companies House that confirms your company's key details are up to date, including registered office, directors, shareholders, people with significant control and your SIC codes. It must be filed at least once every 12 months, with the due date falling on the anniversary of either incorporation or your last statement, and you then have 14 days to file. The fee is currently £50 online (£110 on paper) following the fee increase on 1 February 2026, and filing on time is a legal requirement even if nothing has changed during the year.

The most common way to close a solvent company is a voluntary strike-off using form DS01, which costs £13 to file online with Companies House (£18 on paper). Before applying you should stop trading, settle any debts, deal with VAT, PAYE and a final Corporation Tax return, and distribute remaining assets to shareholders, as anything left in the company passes to the Crown once it is dissolved. You must also notify HMRC and any interested parties, and Companies House will publish a notice in the Gazette before striking the company off after roughly two months if there are no objections.

A dissolved company can usually be brought back to life either by administrative restoration via Companies House or by court order, depending on the circumstances. Administrative restoration is available where the company was struck off while still trading, the application is made within six years of dissolution by a former director or member, and you bring all outstanding confirmation statements and accounts up to date alongside the £341 restoration fee and any penalties. Where those conditions are not met, for example to recover assets that have passed to the Crown, you will need to apply to the court instead.

The Annual Investment Allowance (AIA) lets a business deduct the full cost of qualifying plant and machinery from its taxable profits in the year of purchase, rather than spreading the relief over several years. The limit is permanently set at £1 million per accounting period, covering most equipment, tools, vans, fixtures and computers, though cars are excluded and dealt with under separate rules. If your accounting period is shorter or longer than 12 months the allowance is adjusted proportionately, so it is worth timing larger purchases to make the most of the relief.

You must register for VAT if your VAT-taxable turnover exceeds £90,000 over any rolling 12-month period, or if you expect to exceed it within the next 30 days alone. Registration is also compulsory, regardless of turnover, if you are a UK business buying certain goods or services from abroad under the reverse charge, and you can register voluntarily below the threshold to reclaim input VAT. Once you cross the threshold you have 30 days from the end of that month to register, so it pays to monitor your turnover closely.

Yes. You can apply to deregister voluntarily if your VAT-taxable turnover is expected to fall below the deregistration threshold of £88,000 in the next 12 months. You can do this online through your VAT account, and HMRC will usually confirm a cancellation date within about three weeks. Bear in mind you may owe VAT on stock and assets you still hold on which you reclaimed VAT, so it is worth weighing up whether deregistering actually leaves you better off.

A VAT return reports the VAT you charged on sales (output tax) and the VAT you paid on purchases (input tax) for the period, with the difference either paid to or reclaimed from HMRC, and most businesses file quarterly. Under Making Tax Digital you must keep digital records and submit the return using MTD-compatible software rather than typing figures directly into the HMRC portal. The return and any payment are normally due one calendar month and seven days after the end of the VAT period, and accurate bookkeeping throughout the quarter makes the process far quicker.

Exports of goods to customers outside the UK are generally zero-rated, meaning you charge VAT at 0% provided you keep evidence the goods left the country. For services, the place-of-supply rules apply: most business-to-business services are treated as supplied where the customer belongs, so no UK VAT is charged and the customer accounts for it under the reverse charge, while business-to-consumer services often remain UK VAT-able. The rules vary by sector and by whether you are dealing with goods or services, so it is sensible to confirm the correct treatment before invoicing overseas.

For the 2026/27 tax year the standard personal allowance is £12,570, so you can earn up to that amount before any income tax is due. Above this, the basic rate of 20% applies up to £50,270, the higher rate of 40% from £50,271 to £125,140, and the additional rate of 45% beyond that. Bear in mind the allowance is reduced by £1 for every £2 you earn over £100,000, disappearing entirely at £125,140, and savings and dividends have their own separate allowances.

Marriage Allowance lets a non-taxpayer transfer £1,260 of their personal allowance to a spouse or civil partner who is a basic-rate taxpayer, worth up to £252 off their tax bill for 2026/27. To qualify, the lower earner must normally have income below £12,570 and the higher earner must not pay tax above the basic rate. You apply free of charge through your Personal Tax Account on gov.uk, and once granted it renews automatically each year and can be backdated up to four tax years if you were eligible.

The High Income Child Benefit Charge (HICBC) claws back Child Benefit where you or your partner has an adjusted net income above £60,000 in 2026/27. You repay 1% of the benefit for every £200 of income over £60,000, so the charge equals the full benefit once income reaches £80,000. If you are liable you generally need to report it through Self Assessment, though it can now also be collected through your PAYE tax code, and it falls on whichever partner has the higher income regardless of who actually receives the Child Benefit.

The quickest way is to log in to your Personal Tax Account or the HMRC app on gov.uk, where you can view, save or print a confirmation letter showing your number. It also appears on your payslips, your P60, and previous tax or benefit correspondence. If you still cannot find it you can ask HMRC to post it to you using the online 'find your National Insurance number' service, and for security they will never read it out over the phone.

A fully electric company car is taxed as a benefit in kind on a percentage of its list price, and for 2026/27 the appropriate percentage for zero-emission cars is just 4%. So a £40,000 electric car gives a taxable benefit of £1,600, costing a basic-rate taxpayer £320 and a higher-rate taxpayer £640 a year, which is far lower than the equivalent for petrol or diesel models. The rate is legislated to rise by one percentage point to 5% in 2027/28, so electric vehicles remain a very tax-efficient choice for now.

As a sole trader you can deduct allowable business expenses incurred wholly and exclusively for the trade, which reduces the profit you pay tax on. Common examples include stock and raw materials, office and premises costs, business travel and mileage, accountancy and professional fees, marketing, insurance, and a proportion of phone, broadband and home-working costs where you work from home. You cannot claim personal or private spending, client entertaining, or the cost of everyday clothing, and where something has both business and private use you can only claim the business proportion. Keeping receipts and clear records throughout the year makes it far easier to claim everything you're entitled to at Self Assessment.

Simplified expenses let you claim flat rates instead of working out actual costs: for 2026/27 this is 55p per business mile for the first 10,000 miles (25p thereafter), and a flat monthly amount for working from home based on hours worked (£10 for 25-50 hours, £18 for 51-100, and £26 for 101 or more). They save time but aren't always the most generous, so for a high-mileage vehicle with heavy running costs, or a home office where a fair proportion of actual bills exceeds the flat rate, claiming actual costs can give a bigger deduction. The best approach is to calculate both methods for your situation, as you can use simplified expenses for some items (such as mileage) and actual costs for others. It's worth reviewing this each year as your business changes.

A sole trader invoice should clearly state that it is an invoice and show a unique sequential invoice number, your name and any trading name, your address and contact details, the customer's name and address, a description of the goods or services, the date supplied and the invoice date, and the amount due. If you are not VAT registered you must not charge or show VAT; once you are registered you'll need to issue a full VAT invoice showing your VAT number, the rate applied and the VAT amount. Keep a copy of every invoice, as you must retain business records for at least five years after the 31 January Self Assessment deadline for the relevant tax year.

At a minimum you need to keep a complete record of all business income and expenses, retain the supporting paperwork such as invoices, receipts and bank statements, and keep these records for at least five years after the relevant Self Assessment deadline. Good practice is to maintain a separate business bank account and reconcile it regularly, track who owes you money and what you owe, and set aside funds for your tax bill. From April 2026, Making Tax Digital for Income Tax begins to apply to sole traders and landlords with qualifying income over £50,000, requiring digital records and quarterly updates to HMRC, so adopting compatible bookkeeping software now will keep you ahead of the change. Staying on top of this monthly, rather than at year end, makes the whole process far less stressful.

To register a partnership you must choose a nominated partner who is responsible for managing the partnership's tax returns and records, then register the partnership itself for Self Assessment using form SA400 (online or by post). Each individual partner must also register separately for Self Assessment using form SA401 so they receive their own Unique Taxpayer Reference and file a personal return showing their share of the profits. The partnership should ideally be registered by 5 October following the end of the tax year in which it started trading, and HMRC normally issues the partnership UTR within around 15 days. The nominated partner then files the annual partnership return (SA800), while each partner pays income tax and National Insurance on their own profit share.

Costs vary with the complexity of your affairs and how you're set up, but as a rough guide a sole trader's self-assessment return typically runs from around £150 to £350 a year, while a small limited company needing year-end accounts, a corporation tax return and a confirmation statement usually falls between roughly £80 and £250 a month. Adding payroll, VAT returns or bookkeeping increases the fee, so the most reliable figure comes from a fixed monthly quote based on your turnover, transaction volume and the services you actually need. Beware of headline prices that exclude essentials such as VAT filing or director's self-assessment, as these often appear as extras later.

There's no legal requirement for a limited company to appoint an accountant, but in practice it's strongly advisable because the compliance burden is significant: annual statutory accounts to Companies House, a CT600 corporation tax return to HMRC, a confirmation statement, and usually payroll and director's self-assessment alongside. The current main corporation tax rate is 25% on profits over £250,000, with a 19% small profits rate up to £50,000 and marginal relief in between, and getting the dividend-versus-salary mix right can save meaningfully more than the fee costs. A good accountant also keeps you on the right side of Making Tax Digital and helps avoid the late-filing penalties that mount quickly with a company.

Switching is straightforward and your new accountant handles most of it: you appoint them, sign a new HMRC agent authorisation (the 64-8, which automatically replaces any existing one), and they write to your old accountant requesting professional clearance and your records. You're free to leave at any time, though it's sensible to check your engagement letter for any notice period and to settle outstanding fees, as your former accountant can withhold work until they're paid. To keep things clean, time the move around a natural break such as just after a year-end or tax return filing so nothing falls between the two firms.

You register as an employer with HMRC online before your first payday, and you must do this even if you are the only director of your own limited company drawing a salary. HMRC will issue your employer PAYE reference and accounts office reference, which you enter into your payroll software so you can submit a Full Payment Submission each pay run. Note you cannot register more than two months before your first payday, so time it carefully, and once registered you will normally also need to enrol eligible staff into a workplace pension. For 2026/27 most small employers can also claim the £10,500 Employment Allowance against their secondary Class 1 National Insurance.

A starter checklist (which replaced the old P46) is the HMRC form you use to gather the details needed to put a new employee onto your payroll when they cannot give you a P45 from a previous job. It captures their personal information and asks which statement (A, B or C) describes their situation, which determines the tax code you operate until HMRC confirms the correct one. You should also use it where a P45 is more than a few weeks old or relates to an earlier tax year, and you keep the completed form on file rather than sending it to HMRC.

HMRC charges late payment interest on tax paid after the due date at the Bank of England base rate plus 4 per cent, which currently equates to 7.75 per cent, and this accrues daily until you clear the balance. Late payment penalties also apply: under the traditional Self Assessment regime these are 5 per cent of the unpaid tax at 30 days, six months and twelve months, while the new regime (which applies to taxpayers within Making Tax Digital for Income Tax) charges 3 per cent at 15 days, a further 3 per cent at 30 days, then a 10 per cent annualised charge thereafter. The cheapest course is always to pay on time or, if you genuinely cannot, to agree a Time to Pay arrangement with HMRC before the deadline.

HMRC selects cases through a mix of risk-based computer analysis (its Connect system cross-checks your returns against bank, Land Registry, online marketplace and other third-party data) and random sampling, so any return can in principle be reviewed. Common red flags include figures that are inconsistent with your industry or prior years, persistently late or amended filings, large or unexplained swings in income or expenses, and tip-offs. Keeping accurate, contemporaneous records and filing complete, consistent returns is the best protection, and professional support makes any enquiry far smoother to handle.

There is no single winner; the right choice depends on how your business operates. Xero suits growing businesses that want strong bank reconciliation, a large app ecosystem and good support for multiple users, while QuickBooks tends to be slightly cheaper and works well for sole traders and simpler limited companies. FreeAgent is excellent for freelancers, contractors and small service businesses, particularly as it is free for NatWest, Royal Bank of Scotland, Ulster Bank and Mettle banking customers, and all three are HMRC-recognised and ready for Making Tax Digital. We would normally recommend trialling one or two and matching the software to your transaction volume, sector and whether you need payroll or project tracking built in.