Starting your own business is exciting but as a new business owner, it’s just as important to manage your tax affairs correctly from day one. At Horsfield & Smith, our experienced accountants in Bury help new and growing businesses understand their tax obligations, plan ahead, and build sustainable financial foundations.
This guide explains how UK tax works for the self-employed, which deadlines you must meet, and how effective tax planning strategies can reduce your tax liabilities, improve cash flow, and support long-term financial planning.
Registering with HM Revenue & Customs (HMRC)
If you begin working for yourself, you must register with HMRC by 5 October following the end of the tax year in which your self-employment starts. Missing this deadline could result in a penalty.
You can register in three simple ways:
- Online via the official HMRC self-assessment registration page.
- Phone by calling 0300 200 3300 (Newly Self-Employed Helpline).
- Post by completing form CWF1 and sending it to HMRC.
Once registered, HMRC will issue you a Unique Taxpayer Reference (UTR). From then on, you must report your taxable income each year through a Self Assessment tax return.
Understanding how self-employed tax works
Unlike employees who have tax and National Insurance automatically deducted, self-employed individuals must calculate and pay their own tax liabilities. To stay ahead, set aside a portion of your earnings regularly – we usually recommend saving 20–30% of your profits to cover future payments.
Our tax team helps you forecast what you’ll owe and when, so you always have enough put aside and avoid any unpleasant surprises.
Explore our tax planning services to learn how we help business owners manage their tax obligations efficiently.
What profits are taxable?
HMRC calculates your taxable profit by subtracting allowable business expenses from your total income. Expenses are costs that are “wholly and exclusively” related to your business – such as materials, travel, equipment and professional fees.
You can also claim capital allowances on most equipment purchases under the Annual Investment Allowance (AIA), which allows you to deduct up to £1 million in qualifying assets. Cars and mixed-use assets typically receive partial deductions only.
Remember:
- Personal drawings aren’t tax-deductible.
- Wages paid to a spouse or partner must represent fair payment for real work.
- If you work from home, you can claim a share of household costs or a flat-rate deduction.
For a detailed breakdown, read our guide on allowable expenses for small businesses.
How HMRC allocates profit to tax years
From April 2025, HMRC will adopt a tax-year basis. This means you’ll pay tax on the profits actually earned between 6 April 2025 and 5 April 2026, regardless of your accounting date.
If your accounting year doesn’t match the tax year (for example, you prepare accounts to 31 December), your profits may need to be split across more than one period. Our advisers can help you calculate this accurately and avoid using provisional estimates.
Submitting your tax return and paying your bill
Every business owner must file a Self Assessment tax return once a year:
- Paper returns are due by 31 October 2026
- Online returns are due by 31 January 2027
You’ll also need to make payments on account of income tax and Class 4 National Insurance:
- 31 January 2026 (first payment)
- 31 July 2026 (second payment)
Any balance due for 2025/26, along with your first payment for 2026/27, must be settled by 31 January 2027.
If you’ve just started trading or your previous year’s liability was small, you might not need to make payments on account. We can assess your position and help you plan for these deadlines as part of your tax planning strategy.
National Insurance contributions (NICs)
From 2024/25, National Insurance for the self-employed has been simplified:
- Individuals earning above £12,570 no longer need to pay Class 2 NICs, yet they’ll still receive access to state benefits like the State Pension.
- Those earning between £6,725 and £12,570 receive automatic credits towards benefits.
- Class 4 NICs apply to profits between £12,570 and £50,270 at 6%, and 2% for profits above that.
Class 4 NICs are paid alongside income tax. Our advisers can help you review your income and plan accordingly.
Using the cash basis for small businesses
HMRC allows small businesses to simplify record-keeping by using the cash basis — a method where income and business expenses are recorded only when money is received or paid.
From 2024/25, the cash basis will be the default method unless you opt for the traditional (accruals) approach. This can benefit many small businesses by making it easier to track taxable income and manage tax deductions.
Our business advisory team can help you decide which approach suits your business structure and goals.
Planning ahead for tax efficiency
Good tax planning strategies are about foresight, not avoidance. With professional advice, you can structure your business to take advantage of tax benefits while staying fully compliant.
Our tax experts can help you:
- Choose the most efficient business structure (sole trader, partnership, or limited company).
- Maximise pension contributions and available tax deductions.
- Reduce exposure to capital gains tax and unnecessary liabilities.
- Build a financial planning strategy that supports your long-term goals.
Find out how our business start-up accountants can help you set up your business with confidence.
Get expert help with your start-up tax planning
At Horsfield & Smith, we’ve been supporting businesses across Greater Manchester for over a century. Our experienced advisers guide entrepreneurs through the complexities of UK tax law, ensuring every decision is informed and future-focused.
If you want professional guidance on tax planning for start-ups or need help with your tax obligations, we’re here to assist.
Contact our tax team for advice.
Alternatively, call 0161 761 5231 or email theteam@horsfield-smith.co.uk
