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Regardless of whether you are running your business as a sole trader, a company or a partnership, you need to tell HMRC.

If you are a sole trader or an individual partner in a partnership you must register for self-assessment. This can be done online by following on the GOV.UK website at https://www.gov.uk/log-in-register-hmrc-online-services. HMRC will set up records from the information provided.

A sole trader or individual partner also needs to register to pay Class 2 National Insurance contributions. Registration for Class 2 National Insurance will be done at the same time as registration for business tax. You must register for National Insurance no later than 31 January after the end of the tax year in which you started your business.

In a partnership, the nominated partner must register the partnership for business taxes with HMRC. This is in addition to the requirement for each individual partner to register for tax and National Insurance. A partnership tax return must be completed in addition to the individual partners’ returns.

If you run your business through a limited company, you must notify HMRC that your company is active for corporation tax purposes within three months of starting business, either using the joint registration facility within Companies House Web Incorporation Service or using HMRC’s web registration service.

Any business where turnover exceeds the VAT registration threshold will also need to register for VAT (see Tip 24).
Failure to notify may trigger late notification penalties, or for VAT a late registration penalty.

Example:
DEF Ltd was dormant for some years following incorporation. The company becomes active and makes a taxable profit for the year to 31 December 2014 on which corporation tax of £4,000 is due. The company has not notified HMRC that it is active nor has it told HMRC that it is liable to pay corporation tax or delivered a return within 12 months of the end of the accounting period.

A penalty is charged on the potential lost revenue of £4,000.

A late payment penalty will also be charged on corporation tax paid late.

By notifying on time, this could have been avoided.