When do you pay tax?

koko900

If you register as a sole trader in December, and the self assessment deadline is in January, could you theoretically complete the self assessment a day after you have registered? Or would this not be allowed because you have not earned anything yet and have not spent enough time trading?

Also some websites are saying you can register as a sole trader by your second year of trading, does this mean that if you don't register until this time, that in the duration between, you simply put it on your self assessment?
-I know this question sounds silly, but I am confused about the whole system

Spidernick

If you register as self-employed this December that is in the 2018/19 year, the tax for which is due by 31 January 2020. You are talking about January 2019, which is the deadline for 2017/18 UK tax payments (and e-filed 17/18 tax returns), i.e. a year when you are not self-employed, so no 2017/18 tax return is due (unless you have to file one for any other reason).

I hope that makes sense to you.

koko900

Thanks, so if registering as a sole trader this December would make me liable for tax in 2020, what registration date would I have had to have joined on to be classed as liable for January 2019? Also If I paid the taxes in April 2019 and filed the self assessment at that time, but earned more afterwards before the deadline is reached, would I have completed the process incorrectly for January 2020?

dori2o

The date that is important is not the date you register for Self Assessment (although late registration may incur penalties), but the date you actually started self employment/started receiving other income which requires you to self assessment.

Also, is your self employment income before taking away expenses(Turnover) more than £1000? If not then you won't need to register as your income would be covered under the Trading and Property Income Allowance and would not be liable to tax.

If you want to register just to pay voluntary class 2 NI contributions but your income from self employment before expenses (Turnover) is less than £1000, then you are free to do so and can claim the Trading Allowance on the tax return.

More info on the allowance is here. https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

If your income is over the £1000 allowance then you have to do the return, but you can still claim the allowance of £1000 against your Turnover, but cannot then also claim expenses against the income.

So effectively if your income from self employment is more than £1000 but your expenses are less than £1000 it might be beneficial to claim the allowance.

NOTE: The allowance is UPTO £1000. Therefore, if Turnover is less than £1000, then the allowance is capped at the value of the Turnover.

The allowance cannot be used to put ones self into a loss position.