When do I need to register my business?

If you’re self-employed or own a limited company, you need to register your business with the relevant authorities – whether that’s HMRC, Companies House or both. 

Registering your business ensures you’re compliant with regulations. It also unlocks tax benefits, shows customers and clients that your business is credible, and provides legal protection. 

But when should you register? And are there times when registration isn’t necessary? Let’s go through the basics.

Key takeaways

• When you need to register your business depends on how you plan to trade - such as whether you’re a sole trader, partnership or limited company

• If you’re a sole trader, you usually need to register for Self Assessment once you earn more than £1,000 in a tax year

• You may also need to register for other taxes, such as VAT, if your taxable turnover goes over the VAT threshold

Why should I register my business?

You can unlock several useful benefits when you register your business. However, the main reason you should do it is to ensure you comply with the legal requirements of running a business. 

Registering your business helps you avoid fines, penalties, and investigations – all of which can hinder a thriving operation.

Aside from meeting legal obligations, if you don’t register, you may miss out on benefits designed for legally compliant businesses. For example, when you register, you can:

• Open a business bank account

• Apply for business finance, such as a loan or credit card

• Claim relevant tax deductions and expenses 

• Gain legal recognition and the protection that comes with it

• Access resources, such as government grants and mentorship 

A registered business also signals to the world that you’re professional and credible. It gives your business a name and a unique identity in the marketplace, making it easier for customers and clients to find you, which is crucial for establishing your business.

When should I register my business? 

The right time to register your business depends on a couple of factors. If you’re a sole trader or entering into a partnership, you should register with HMRC as soon as you start trading and your earnings exceed £1,000. If you decide to wait, you must register with HMRC by the October following the end of the tax year at the latest.

This lets HMRC know your employment status and ensures to expect a tax return from you. Failing to register on time or at all could result in a penalty.

If you set up a limited company, you must register with Companies House before your company starts trading. This process can take longer than registering as a sole trader because you also need to:

• choose a business name

• define your business and share structure

• appoint a director

• pay the relevant fees

After you register your limited company, you must register it for corporation tax within three months with HMRC.

You must also register for VAT if your business's turnover exceeds the threshold, which is currently £90,000. Read more: Register your business name in seven easy steps  

How do I register my business?

How you register your business depends on how you structure it. Let’s explore the three options so you can apply the relevant process to your situation:

Sole trader

Setting up as a sole trader is the most straightforward way to structure a business. The main thing you need to do is to register as self-employed. You can register online, and the process becomes even more straightforward if you have the following information ready when you visit the website:

• Government Gateway ID and password

• National Insurance (NI) number

• Personal details, including your name, phone number, postal address and email address

• Your business’ name and start date

• A description of your business

Once HMRC receives this information, it issues your Unique Taxpayer Reference (UTR), which you need when you file your tax return or contact HMRC about self assessment. The registration process takes about 10 working days from submitting your application to receiving your UTR. 

Partnership

If you’re starting a business with one or more other people, you may choose to set up as a partnership. This means you share responsibility for running the business, including its profits, debts and taxes.

One partner must be chosen as the nominated partner. They're responsible for registering with HMRC and managing the tax return on behalf of the partnership. Each partner must also register separately for Self Assessment.

It helps to have the following information ready before you start:

• The partnership’s name and business address

• The date the partnership started

• A description of the business

• The name, address and National Insurance number of each partner

• The nominated partner’s details

• Each partner’s UTR

Once the partnership is registered, HMRC will issue a Unique Taxpayer Reference for the partnership. This is separate from each partner’s personal UTR and is used when filing the partnership tax return.

Limited company

Setting up a limited company and registering it can take longer than registering as a sole trader, so make sure you have everything in place before you start. You need:

• Your business name. Choosing a name can take time, so plan ahead

• Your company’s registered address. This can be your home address, but keep in mind it appears publicly on the Companies House listing

• Director(s) details. Key information of anyone you appoint as a director 

• Details of any person(s) with significant control over the company. This refers to individuals who have sway over the business, such as those holding a majority of shares

• A Standard Industrial Classification (SIC) code. This code identifies your company’s business activity

• Details of at least one shareholder and your company’s share structure. You need to provide information about at least one shareholder and describe how your company divides its shares

Read more: 

• How to choose a company name

• How to register a business name

You register your company directly with Companies House and pay the relevant fees to them. Once you submit all required information, you should receive confirmation, a company registration number (CRN) and your certificate of incorporation within 24 hours.

When is it unnecessary to register a business?

Under certain situations, you don't need to register your business or the additional income you get from a side hustle or hobby.

Anyone can earn up to £1,000 per tax year without having to declare it or register it as business income. Known as the trading income allowance, it’s a tax exemption for people who earn less than the £1,000 threshold from business activities. It can be helpful if you’re just starting a business or don’t intend it to be your main source of income. 

It’s still important to keep a record of these earnings, as HMRC can enquire about business-related income at any time. However, as long as you don’t earn over the £1,000 allowance, you don’t need to take any further action.