Small businesses must register with HMRC for taxation purposes before they begin trading. If you are a sole trader, you must simply register for self-assessment tax returns, and you must also pay income tax on profits earned and pay Class 2 and 4 National Insurance contributions.
If you are running an incorporated small business, you will need to register for Corporation tax. This can usually be done online when you register initially with Companies House. You will need to register for corporation tax up to three months after you begin trading, and penalties will be incurred if you register late. Your UTR is necessary to complete the process.
If your small business’s VAT taxable turnover exceeds the threshold (£85,000) within 12 months, you will need to register for VAT. You may also register voluntarily if your turnover is within the threshold but you believe it will exceed it in the future. VAT applications can be made online or in writing to HMRC. Once you have registered for VAT, you will receive a VAT certificate by post.
If your small business employs people, you will also need to apply for an employer PAYE reference number. This must be done before the first payday for your employees. Limited companies with less than nine directors may apply online here. Other small business entities may apply online here. Once you have completed the application process, you will receive an employer reference number from HMRC. The first three numbers of the code refer to the tax office that is responsible for your PAYE. The rest of the number is the tax office’s employer reference.