Your tax questions, answered simply

You usually need to file one if you were self employed and earned more than £1,000, rented out a property, took dividends from a company, earned over £50,000 while you or your partner claimed Child Benefit, or had other untaxed income such as savings or money from abroad. If all your income was from a normal job and taxed through your wages, you usually do not. If you are unsure, it is best to check early rather than risk a late penalty.

For an online return, the deadline is 31 January following the end of the tax year, and that is also the date any tax you owe must be paid. Paper returns are due earlier, by 31 October. If it is your first return, you also need to register with HMRC by 5 October. Filing early is always fine, and it does not bring your payment date forward.

Filing late brings an automatic £100 penalty, even if you owe nothing, and further charges build up the longer it is left. Paying late adds interest, plus extra penalties once the bill is more than 30 days overdue. If you are going to struggle to pay, the worst thing to do is nothing. HMRC will often agree a payment plan if you contact them, and we can help you sort that out.

Most people can earn £12,570 a year before paying any income tax. This is the personal allowance. After that, you pay 20% up to £50,270, then 40% up to £125,140, and 45% above that. Only the income within each band is taxed at that rate. These figures apply in England, Wales and Northern Ireland, while Scotland has its own bands.

You can claim costs that are wholly for the business. Common ones include stock and materials, tools, business travel and mileage, a share of your phone and internet, accountancy fees, advertising and insurance. If a cost is part business and part personal, you only claim the business share. Keeping receipts as you go is the easy way to make sure nothing is missed, because every genuine cost claimed lowers your tax bill.

Yes, if you genuinely work from home. As a sole trader you can either claim a simple flat monthly amount based on the hours you work from home, which needs no receipts, or work out the actual share of your bills such as heating, electricity and broadband. If you run a company, there are slightly different rules, but a reasonable claim is still available. We usually work out both methods and use whichever gives you the better result.

You must register once your taxable turnover goes over £90,000 in any rolling 12 month period, or if you expect to pass that figure within the next 30 days. This is based on your sales, not your profit, and it is a moving 12 month window rather than your accounting year. You can also register voluntarily below the threshold, which sometimes makes sense, for example if most of your customers are VAT registered themselves.

The VAT registration threshold is £90,000 of taxable turnover in a rolling 12 month period. There is also a deregistration threshold of £88,000, which is the point at which you can come out of VAT if your turnover falls. Thresholds are reviewed from time to time, so it is worth keeping an eye on your rolling total if you are getting close.

Being a sole trader is simpler, with less paperwork, but you are personally responsible for any business debts. A limited company protects your personal money, can look more established, and is often more tax efficient once profits are higher, but it comes with more admin. Many people start as a sole trader and look at a company once profits are comfortably into the tens of thousands. The best choice depends on your numbers and plans, so it is worth a quick chat first.

Dividends are paid to you as a shareholder out of your company's profit after corporation tax. The first £500 of dividends each year is tax free. Above that, the rate depends on your overall income, and dividend tax rates are lower than the rates on salary. Because dividends and salary are taxed differently, getting the mix right is one of the simplest ways to keep a director's overall tax bill down.

Corporation tax is charged on company profit. Profits up to £50,000 are taxed at 19%, profits above £250,000 at 25%, and in between there is a sliding scale that lifts the effective rate gradually from 19% towards 25%. The tax is due 9 months and 1 day after your company year end, so it is wise to set money aside through the year.

Keep records of your income and expenses, along with bank statements, invoices and receipts. If you are self employed, keep them for at least 5 years after the 31 January filing deadline for that year. Limited companies should keep records for at least 6 years from the end of the company year. Digital copies are fine, and keeping things tidy as you go makes your year end far quicker.

It is an advance payment towards next year's tax bill. If you owe more than £1,000, HMRC asks you to pay this year's bill plus half of it again in January, then the other half in July. So your first January bill can feel larger than expected. You are not paying extra overall, just earlier, and the advance payments are taken off next year's bill. If your income is set to fall, the payments can sometimes be reduced.

Yes. The money in your company is not automatically yours to spend, because the company is a separate legal thing. You take it out as a salary through payroll, or as dividends from profit, and both have their own tax. Taking money out in other ways, such as a director's loan, has its own rules and can create a tax charge if not handled properly. Setting up a sensible, tax efficient way to pay yourself is something we help company clients with.

Usually yes. If your profit from renting out a property is more than the £1,000 property allowance, you need to report it, normally through Self Assessment. You can deduct running costs such as letting fees, insurance and repairs, and you get a 20% tax reduction for mortgage interest rather than a full deduction. The rules for landlords have changed a lot, so current advice is worth getting.

Making Tax Digital, or MTD, means keeping digital records and sending HMRC updates using approved software instead of just filing once a year by hand. It already applies to all VAT registered businesses. From April 2026 it also starts for sole traders and landlords earning over £50,000, who will send a summary every quarter, with those over £30,000 following a year later. If that is you, it is worth getting set up on the right software early, and we can sort that for you.

You can pay HMRC by bank transfer, debit card, or through your online HMRC account, and by direct debit. Use your own tax reference so the payment is matched to you. Make sure it reaches HMRC by the deadline, as some methods take a few days to clear. If paying in full is difficult, you can often set up a monthly payment plan with HMRC, and it is far better to arrange that than to simply miss the date.

It lets you earn up to £1,000 a year from self employment or a side hustle without paying tax on it, and often without needing to register at all. If you earn more than £1,000, you do need to file a return, and you can then choose to deduct either your actual expenses or the £1,000 allowance, whichever helps more. There is a separate £1,000 allowance for small amounts of property income.

Self employed people pay Class 4 National Insurance on their profit, currently 6% on profit between £12,570 and £50,270, and 2% on profit above that. It is worked out on your tax return and paid alongside your income tax. There used to be a separate weekly Class 2 charge, but the rules have been simplified so most people with reasonable profits now keep their state pension record without paying it.

You are not legally required to have one, but a good accountant usually pays for themselves. We make sure you claim everything you are entitled to, file everything correctly and on time, and spot ways to save before you even ask, while taking the stress and the deadlines off your plate. It also frees you up to spend your time running your business rather than wrestling with tax. If you would like to see how we could help, a first call back is free.