One of the first things to do when getting started with a new business is to register it. But how? It isn’t something taught in school, and if you’ve only ever worked for someone else, it won’t be something you’ve had to worry about before.
Good news: registering your business is relatively simple and quick, and it can all be done online. You can also register by phone or post if you prefer.
Registering your business means completing the relevant forms via HMRC’s Set up a business page. The questions are straightforward and among the usual details, you’ll be asked to confirm your National Insurance number.
The HMRC registration process is the same throughout the UK, so don’t worry if you’re not in Scotland as we are.
HMRC registration is essential whether you’re setting up as a sole trader or as a limited company. In the case of setting up a limited company, you also need to register with Companies House.
If you’re not sure whether you ought to set up as a sole trader or as a limited company, check out our article Sole trader versus limited company: the pros and cons for your small business.
You may also decide to register for VAT, especially if you’re likely to be incurring significant business expenses during the early months of being in operation.
VAT registration does pose an extra admin burden, though, so you may prefer to wait until you reach the VAT threshold before registering. You’ll also need a registered trading address in order to be VAT registered.
When should you register your business?
While the process of registering your business itself isn’t too difficult, people are often unsure as to when to do it. Should you do it after your first piece of business? Or after you settle your first invoice?
We recommend registering with HMRC as soon as you’re ready to start trading.
In HMRC’s eyes, “trading” means selling goods and services for a profit on a regular basis. This means there can be grey areas when it comes to working out whether you can truly be deemed to be trading.
For example, semi-recreational activities that you do at home and that lead to you selling products at an occasional car boot sale are unlikely to be seen as a business. Therefore, you wouldn’t need to be registered with HMRC.
But given that most businesses are very much about selling goods and services for a profit on a regular basis, skipping registration is rarely an option.
Assuming you’re ready to take the plunge, we suggest starting out by registering as a sole trader. That way, you won’t need to worry about dealing with Companies House at the outset of your business.
Even if you plan to work with others, there’s nothing to stop you each registering as sole traders and later coming together to form an official business partnership as a limited company.
This won’t apply in all cases and there are some circumstances where it’s right to be registered as a limited company from the outset. You can get advice on this from HMRC or by talking with accountants such as us.
Remember that we’ve also published a pros and cons list to help you understand the relative merits of being a sole trader or a limited company.
What else should you do when registering a business?
We’ve already mentioned VAT registration, which is mandatory if your income exceeds that VAT threshold (currently £85,000). You can register voluntarily even if your income is below the threshold, which may be wise if you have a lot of early expenditures to make that include a reclaimable VAT component. If you’re not sure whether to register for VAT, speak with your accountant for advice.
You might also register with the Information Commissioner’s Office (ICO). With the General Data Protection Regulations (GDPR) in mind, your need to register with the ICO depends on your role as a data controller and data processor in dealing with personal data of staff and customers.
In most cases, it’s a good idea to register with the ICO, and the annual fees for doing so are often relatively low, with most small businesses paying only £40–£60 per year.
No other formal steps need to precede the registration of your business.
Let’s sum up
The process for registering your business is easier than it’s ever been, and it’s possible to get through the online forms in as little as 30 minutes. Be sure of how you want to set up (either sole trader or limited company), and don’t be afraid to ask your account if you need advice on what’s best for your personal circumstances.
Or if you have any questions please get in touch using the form below. We look forward to chatting with you.