Can someone explain the rationale behind advising starter VA's to immediately sign up for Self Assessment with HMRC?


#1

Hello All,

I was having a chat with someone from HMRC yesterday about this and was advised that, as my income is currently below £10,000 p.a., there is no need for me to (re)register with HMRC for a(nother) UTR number / CWF1 form (my husband’s accountant previously signed me up without my full understanding of the yearly tax return responsibilities).

It scared the life out of me when I got the dreaded brown envelopes from HMRC!

Which leaves me wondering; why is immediate registration for self assessment (SA100) recommended by SVA, rather than waiting for our business’ trading income to reach the £1,000 annual income tax allowance (trading allowance) limit?

Feel free to go over my question and pull it apart to understand it.


#2

So you are already registered for self assessment for other self employed income? If so, have a chat with the accountant about what’s best individually for you…Always best!

There is a “hobby business” allowance of £1,000 income, but TBH any VA charging an average or even below average VA hourly rate would very quickly go over that. Our recommendation that you register is based upon:

  • You will most likely go above the “hobby business” allowance fairly quickly
  • You’ll be busy with clients if you do that, so it’s easier to get it out the way before you are busy
  • Most VAs haven’t run a business before and HMRC are very helpful about advising what you need to do and when - and if you are registered, they send you reminders
  • In non-Covid times, they run super useful workshops, which are an ace way of networking with other new businesses and getting work!!! (I know a few VAs who attend these regularly!!!)

#3

I believe it’s the tax threshold that matters - I am still awaiting my P45 from my permanent job and started my business in this new tax year but I was under the impression that until you reach £11500 tax allowance you don’t need to register for self assessment as my son did this a few years ago in his first year of being SE and they told him he need not have worried until he was earning enough to be taxed and they are happy with that.


#4

No because even if you earn under the tax threshold, they do still need to know how much you earned for all sorts of other things - tax credits, council tax discounts etc. So basically if you earn more than £1000 from a business (with the exception of renting out a room in your house, which I believe is a higher threshold), they need to know about it. You do have until the following Oct to tell them about it, but it’s easy to get busy and forget, so I’d always recommend you do it when you start earning money.