Journey

Manage your tax compliance

Understand and manage your ongoing tax obligations as a UK business owner. Covers Self Assessment, VAT, Corporation Tax, record keeping, Making Tax Digital, filing deadlines, and avoiding penalties.

Running a Business Updated 15 September 2026

10 milestones references 16 guides

Understanding your tax obligations

Your tax obligations depend on your business structure. Sole traders and partners pay Income Tax through Self Assessment. Limited companies pay Corporation Tax. If your taxable turnover exceeds the threshold, you must also register for VAT.

This journey helps you understand what taxes apply to your business and how to stay compliant throughout the year.

Know which taxes apply to your business

Start by understanding which taxes you must pay based on your business structure. Getting this right from the start prevents problems later.

How taxes work for limited companies

Corporation Tax, dividends, PAYE for directors, and filing obligations for limited companies.

Register for Self Assessment

Sole traders and partners must register within 6 months of the end of the tax year in which they started trading. You'll receive your Unique Taxpayer Reference (UTR).

Get your UTR number

Your Unique Taxpayer Reference is essential for all Self Assessment correspondence with HMRC.

Self Assessment registration deadline

Register by 5 October following the end of the tax year in which you started self-employment to avoid penalties.

Registration deadline

5 October following the end of the tax year

Example: Tax year 2024/25

Register by 5 October 2025

Who must register

Self-employment income exceeds £1,000 in the tax year

UTR delivery time

Posted within 10 working days (21 days if overseas)

Activation code

Sent separately by post
Register for the right taxes
Once you know which taxes apply, register with HMRC. Missing registration deadlines results in penalties, so act promptly when your business starts or reaches a threshold.

Register as self-employed with HMRC

Register for Self Assessment and Class 2 National Insurance when you start self-employment.

VAT registration

Register when your taxable turnover exceeds the threshold, or voluntarily if it benefits your business.
VAT registration threshold

You must register for VAT if your taxable turnover exceeds the threshold in any 12-month period. You can also register voluntarily below this threshold.
VAT registration becomes mandatory when your taxable turnover exceeds £90,000 in a rolling 12-month period (as of 1 April 2024). You can also register voluntarily below this threshold.

Mandatory threshold

£90,000 taxable turnover in rolling 12 months

Registration deadline

30 days after exceeding threshold

Voluntary registration

Allowed at any turnover level

Deregistration threshold

£88,000 - can deregister if turnover falls below

Standard rate

20% (most goods and services)

Reduced rate

5% (domestic fuel, children's car seats, etc.)

Zero rate

0% (most food, books, children's clothes, etc.)

What counts as 'taxable turnover':
Includes: Standard-rated, reduced-rated, and zero-rated sales
Excludes: VAT-exempt sales (insurance, finance, education, health), goods sold outside the UK
Calculate over rolling 12-month period - if last 12 months exceed £90,000, you must register
Future test: If you expect to exceed £90,000 in next 30 days alone, register immediately

Making Tax Digital (MTD) for VAT - mandatory for ALL VAT-registered businesses:
You must keep digital VAT records using MTD-compatible software
Submit VAT returns directly from the software via HMRC API
Applies to all VAT-registered businesses regardless of turnover (since April 2022)
Penalties for non-compliance: Points-based penalty system (4 points for quarterly, 5 for monthly, 2 for annual filers trigger penalties). Late filing penalties start from £200 per late submission after reaching penalty point threshold

Should you register voluntarily below £90,000?
Reasons TO register:
Reclaim VAT on business purchases and expenses (especially valuable for high capital expenditure)
Appear more established and professional to B2B customers
Necessary to trade with VAT-registered B2B customers who want VAT invoices
Reasons NOT to register:
Administrative burden of VAT returns, MTD software, and record-keeping
20% price increase if selling to consumers who cannot reclaim VAT
Cash flow impact - you collect VAT from customers and pay it to HMRC before receiving payment if not using Cash Accounting scheme

VAT schemes for small businesses:
Flat Rate Scheme - pay flat percentage (6.5%-14.5% depending on sector) of gross turnover instead of tracking input VAT. If you're a "limited cost trader" (goods costs under 2% of turnover, or under £1,000/year), you must use a higher 16.5% rate instead. Available when joining VAT if turnover under £150,000. You must leave the scheme if turnover exceeds £230,000 (including VAT).
Cash Accounting - pay VAT when customers pay you, not when you invoice. Join if turnover under £1.35 million, leave if exceeds £1.6 million.
Annual Accounting - file one VAT return per year instead of four, make advance payments. Join if turnover under £1.35 million, leave if exceeds £1.6 million.

Penalties for late registration:
You must pay VAT due from when you should have registered, even if you did not charge customers
Late registration penalty: Percentage of VAT due for period of non-registration based on behaviour: Non-deliberate 0-30%, Deliberate 20-70%, Deliberate and concealed 30-100%. Minimum penalty £50
Criminal prosecution possible for deliberate failure to register

Deregistration - if your turnover falls below £88,000 (deregistration threshold), you can choose to deregister. You must deregister if you stop making taxable supplies altogether.

Register for VAT online (opens in a new tab)

Official source - gov.uk/vat-registration-thresholds
Corporation Tax basics

Limited companies must register for Corporation Tax within 3 months of starting business activity.

Corporation Tax rates

Corporation Tax rates depend on your taxable profits. Smaller companies benefit from the small profits rate.

Main rate (25%)

Applies to profits over £250,000 (from 1 April 2023)

Small profits rate (19%)

Applies to profits of £50,000 or less

Lower threshold

£50,000 (small profits rate eligibility)

Upper threshold

£250,000 (main rate applies above this)

Marginal relief band

£50,000 to £250,000 (tapered effective rate 19%-25%)

Associated companies rule

Thresholds divided equally by number of associated companies

The Corporation Tax rate structure changed significantly from 1 April 2023 under Finance Act 2022. The main rate increased from 19% to 25% for profits over £250,000, while small companies with profits up to £50,000 retained the 19% rate. Companies with profits between £50,000 and £250,000 benefit from marginal relief, which provides a gradual transition between the two rates.
Associated companies: If you have associated companies (connected businesses under common control), the profit thresholds are divided equally by the total number of companies. For example, with 2 associated companies, the small profits threshold becomes £25,000 each.

Corporation Tax rates (opens in a new tab)
Keep proper business records

Good record keeping is the foundation of tax compliance. Keep accurate records throughout the year to make filing easier and to support your claims if HMRC asks questions.

Keep business records as a sole trader

What records to keep, how long to keep them, and what format is acceptable.

Record keeping requirements

Different records must be kept for different periods. Most business records must be kept for at least 5 years from the 31 January deadline.

Accounts and tax records

6 years from end of accounting period

PAYE records

3 years after the tax year they relate to

VAT records

6 years (or 10 years for certain assets)

Employee records

6 years after employment ends

Self Assessment record keeping

HMRC can charge penalties if you fail to keep adequate records.

Standard retention period

At least 5 years after the 31 January submission deadline

Example: 2024/25 return

Due 31 January 2026, keep records until 31 January 2031

Late filing retention

If return submitted more than 4 years late, keep records for 15 months after submission

Records to keep include: sales and income, business expenses, receipts, bank statements, invoices, till rolls. VAT and PAYE records also required if registered.
Prepare for Making Tax Digital

Making Tax Digital (MTD) requires businesses to keep digital records and submit returns using compatible software. MTD for VAT is already mandatory. MTD for Income Tax is being phased in from April 2026 for higher earners.

Prepare for Making Tax Digital

Understand MTD requirements, software options, and implementation timelines for your business.

MTD for Income Tax thresholds

MTD for Income Tax Self Assessment is being phased in based on income thresholds.

Phase 1: From 6 April 2026

Qualifying income over £50,000 (approx. 780,000 individuals)

Phase 2: From 6 April 2027

Qualifying income over £30,000 (additional 970,000 individuals)

Phase 3: From 6 April 2028

Qualifying income over £20,000

Qualifying income definition

Combined self-employment and property income (excludes employment, pension, savings, dividends)

Requirements: Keep digital records, use MTD-compatible software, submit quarterly updates, submit final declaration by 31 January.

Find MTD-compatible software (opens in a new tab)

MTD software costs

You'll need compatible software to submit digital returns under MTD.

Average one-off setup cost

£320 per business

Average annual subscription

£110 per business

Free options

Available for smaller businesses with straightforward affairs

Software types include full-service (creates records and submits) and bridging software (connects to existing spreadsheets). HMRC does not provide software.
Claim allowable expenses

Reduce your tax bill by claiming all allowable business expenses. Keep receipts and records throughout the year rather than scrambling at year end.

Claim business expenses as a sole trader

What expenses you can claim, simplified expenses, and capital allowances.

Expenses you can claim

Detailed guidance on allowable expenses for different business types.
File your tax returns on time

Each tax has its own filing deadline. Missing deadlines triggers automatic penalties - often starting at a fixed amount that increases the longer you delay.

File your Self Assessment tax return

Online deadline is 31 January. Paper deadline is 31 October. File early to know what you owe.

Self Assessment filing deadlines

Key dates for Self Assessment tax returns.

Paper return deadline

31 October 2026 (11:59pm)

Online return deadline

31 January 2027 (11:59pm)

Earliest submission date

6 April 2026

Pay through tax code deadline

30 December 2026 (to collect via PAYE)

Amendment window

12 months from the Self Assessment deadline

Paper returns must be received by HMRC, not just posted. Online filing is recommended as it provides immediate confirmation.

Submitting VAT returns

Quarterly VAT returns due 1 month and 7 days after the period end. Submit using MTD-compatible software.

File your Company Tax Return (CT600)

Due 12 months after your accounting period ends. Must be filed online using iXBRL format.

CT600 deadlines

Corporation Tax payment is due earlier than the return filing deadline.

Payment deadline

9 months and 1 day after accounting period ends

Filing deadline

12 months after accounting period ends

Example: Year end 31 March 2025

Pay by 1 January 2026, file by 31 March 2026

File annual accounts with Companies House

Limited companies must file accounts within 9 months of their financial year end.

Annual accounts filing deadlines

Companies House filing deadlines differ from HMRC deadlines.

Private limited companies

9 months after financial year end

Public limited companies (PLCs)

6 months after financial year end

First accounts (private companies)

21 months from date of incorporation

First accounts (public companies)

18 months from date of incorporation

Calculation method

Deadline is end of month, 9 months after year-end (e.g., 31 December year-end = 30 September deadline)
Pay your tax on time
Payment deadlines are separate from filing deadlines - and often earlier. Late payment triggers interest immediately, and penalties follow for significant delays.

Self Assessment payment deadlines

Self Assessment tax is due on 31 January following the tax year. If you owe more than the threshold, you'll also pay payments on account in January and July.

Main payment deadline

31 January following the tax year end

First payment on account

31 January (during tax year)

Second payment on account

31 July (after tax year ends)

Balancing payment

31 January (if actual liability exceeds payments on account)
Payments on account

Payments on account apply if your tax bill exceeds the threshold and less than 80% was collected at source.
How calculated

Each payment is half of previous year's tax bill

Example

If 2025/26 tax bill was £3,000, each payment on account for 2026/27 is £1,500

Exemptions from payments on account:
Previous year's tax owed was under £1,000
Over 80% of previous year's tax was collected at source (PAYE, bank interest)
gov.uk
Pay your Self Assessment tax bill (opens in a new tab)

Payment methods and what to do if you cannot pay in full.

gov.uk
Pay Corporation Tax (opens in a new tab)

Due 9 months and 1 day after your accounting period ends (earlier for large companies).
Understand penalties and interest

HMRC penalties escalate the longer you delay. Late filing penalties start at a fixed amount and increase over time. Late payment triggers interest from day one, with percentage penalties added later.

Self Assessment late filing penalties

Penalties start at a fixed charge and escalate for prolonged delays.

1 day late

£100 fixed penalty (applies even if no tax owed)

3 months late

£10 per day (up to 90 days = £900 maximum)

6 months late

5% of tax owed or £300, whichever is higher

12 months late

Additional 5% of tax owed or £300, whichever is higher

Maximum penalty

Up to 100% of tax owed in serious cases

Penalties are cumulative. Filing 12 months late can result in £100 + £900 + two 5% penalties. Partnership returns incur penalties for all partners if late.

Self Assessment late payment penalties

Interest runs from the payment due date. Percentage penalties are added for significant delays.

30 days late

5% of tax unpaid

6 months late

Further 5% of tax still unpaid

12 months late

Further 5% of tax still unpaid

Maximum total penalty

15% of unpaid tax (plus interest)

Interest rate (from 9 January 2026)

7.75% per annum (Bank of England base rate plus 4%)

Penalty payment deadline

Within 30 days of penalty notice date

CT600 late penalties

Corporation Tax return late filing penalties follow a different structure from Self Assessment.

1 day late

£100 automatic penalty

3 months late

Additional £100 (total £200)

6 months late

Additional 10% of tax due

12 months late

Additional 10% of tax due (total 20%)

Companies House late filing penalties

Automatic penalties apply for late filing of annual accounts - no excuses accepted.

Up to 1 month late

£150

1 to 3 months late

£375

3 to 6 months late

£750

Over 6 months late

£1,500

Repeat late filing

Penalties doubled if late 2 years in succession

These penalties are automatic and in addition to any penalties from HMRC for late tax returns. Persistent failure to file can result in the company being struck off the register.

Late filing penalties (opens in a new tab)

HMRC interest rates

Interest is charged daily on late payments.

Late payment interest (from 9 January 2026)

7.75%

Repayment interest (from 9 January 2026)

2.75%

Interest calculation (from 6 April 2025)

Bank of England base rate + 4%

Time to Pay

Can arrange payment plan if unable to pay in full

Penalty reform

New points-based late filing penalty system being phased in

HMRC interest rates (opens in a new tab)
Handle special situations

Some transactions trigger additional tax obligations - buying property, employing contractors in construction, or filing partnership returns.

Pay Stamp Duty Land Tax (SDLT)

When buying property in England or Northern Ireland. Scotland has LBTT; Wales has LTT.

File partnership tax returns (SA800)

Partnerships file a separate return; partners then include their share on personal returns.

Understand property transaction taxes

Different taxes apply in England, Scotland, Wales, and Northern Ireland.
Get help when you need it

Tax can be complex. HMRC offers free guidance and webinars. Professional accountants and tax advisers can help with more complex situations.

gov.uk
HMRC Self Assessment helpline (opens in a new tab)

Phone support for Self Assessment queries.

gov.uk
Find a tax adviser or accountant (opens in a new tab)

For complex situations, professional advice can save money and prevent problems.

gov.uk
HMRC webinars and learning (opens in a new tab)

Free online learning resources from HMRC.

Manage your tax compliance

Understanding your tax obligations

Know which taxes apply to your business

Register for the right taxes

Keep proper business records

Prepare for Making Tax Digital

Claim allowable expenses

File your tax returns on time

Pay your tax on time

Understand penalties and interest

Handle special situations

Get help when you need it

Related journeys

File your first Self Assessment tax return

Self Assessment for landlords

Self Assessment quick compliance check

File your first Corporation Tax return