A guide to accounts and tax for new businesses

Choosing your business structure 

The first step in your exciting business journey is to decide which structure is best for your start-up: 

Sole trader – the easiest business structure to establish. The owner is solely responsible and liable for any debts. Essentially you are your business.

Partnership – working in partnership means you and your business partners take a share of the profits and liabiliies, but it is otherwise like sole trading. You should have a partnership agreement in place in case any disagreements arise. As well as general partnerships, there are also Limited Liability partnerships (LLP) and limited partnerships. 

Limited company – a formal structure registered with Companies House. A company is a separate entity to its owners, limiting liability. There are four classifications for company size – dependent on turnover, balance sheet total and average number of employees. They are: 

• Micro 
• Small 
• Medium 
• Large 

Other company structures exist, such as a public limited companies, unlimited companies and companies limited by guarantee but we won’t be covering them here.

Our guide to trading as a sole trader or limited company may be useful when deciding on your business structure. 

Register with HMRC 

Once you start trading, you must register with HMRC. Your registration will be different depending on your business structure. 

Sole-traders and general partnerships will need to register with HMRC using the appropriate service. Limited liability partnerships and limited companies will need to register with Companies House as well. They are both required to file annual accounts each year. 

Once registered, HMRC will give your business a Unique Tax Reference (UTR). You will need this to file your tax return (self-assessment income tax or corporation tax for a limited company). 

You may also need to register for VAT or Pay As You Earn (PAYE) and the registration process is relatively simple. 

Managing your accounts 

Bookkeeping 

Bookkeeping is the process of recording business transactions. The recording of these should be frequent and kept up to date. Once the financial year is complete, we use these 'books' to create accounts. 

Part of ensuring bookkeeping is complete is reconciling your bank account, which means matching your bookkeeping records to your bank statements. Modern bookeeping software can pull through your bank feed automatically to make this process much easier.

Accounts 

You should start your accounting period on the first day of trading. This may be the first day you receive money for services or goods you are providing but there is no hard and fast rule.

If your business is a limited company, your first accounting year will start on the day you incorporate. The year will end just over 12 months later as Companies House sets accounting reference dates to the end of calendar months. For example, incorporation on 12th March 2026 will set the company’s year-end as 31st March 2027. 

For sole traders (unincorporated businesses), due to basis period reform which came in from 1st April 2024, year-ends will be in line with the tax year e.g. 6th April 2026 to 5th April 2027.

The cash basis is the default method for sole traders to prepare accounts from April 2024 onwards, although you can still choose to use traditional or accruals basis accounting.  Limited companies must use the accruals basis. What type of accounts you prepare will depend on your business structure and size. Under ongoing Companies House reforms, it had previously been announced that small and micro entities would need to start filing a Profit and Loss statement, along with the balance sheet they already need to file, from April 2027. However this has been postponed with no new date announced. In May 2026, Companies House said they would be giving an update on this 'very soon'.

Plans, budgeting, forecasting and cashflow 

For your business to succeed it is important to put a strategy in place. Firstly, when you are starting a business, it is important to think ahead, set goals and make plans for how to achieve those goals. Goals should always be SMART: 

Specific – clear and include who, what, when, where 
Measurable – use quantity, size, amount or duration so you can assess performance 
Achievable – make sure it is attainable; that you have the skills and attitude to succeed 
Relevant – ensure the goal will help you meet your vision and longer term plans
Timely – include a specific deadline or time period 

It is good to look back and review how your goals are going, whether this is annual or six-monthly. Look at what you set out to achieve, what actually happened and why. It may be that your goals changed, or you achieved some and not all. You can assess whether you are still on track to meet your goals or whether you need to do something else to make it happen.  

Record keeping 

The best way to create and keep your business records is to use online software from the start and embrace this essential technology. It is likely that over the next few years you will need to comply with Making Tax Digital for income tax (MTD for income tax), which began for the first group of sole traders and landlords on 6th April 2026.  You can find more information on how long you need to keep your business records here. 

Navigating taxes 

Income tax for sole traders 

Once you prepare your business accounts, you or your accountant should have all you need to complete your tax return. You need to prepare a self-assessment tax return and submit this to HMRC. Partners of the partnership will also need to complete a self assessment tax return. The usual deadline for online submission is 31st January. 

The income tax rate you pay will depend on the level of your earnings and which tax rate bracket you fall in to. 

The tax year runs to 5th April, and your tax return will be completed to this date. Where your accounting year does not match the tax year, you will need to consider the basis period rules. Your accountant will be able to explain these rules, and the changes, to you. 

Income tax for partnerships 

Partnerships do not pay tax themselves; it is the individual partners who pay tax on their share of profits. Partners need to complete a self assessment tax return by 31st January following the tax year end. 

Partnerships also need to file a partnership tax return annually. One partner should be nominated to receive correspondence about and submit the return. 

Corporation tax for limited companies 

Once your company accounts are complete, you, or your accountant, can prepare your company tax return. You must submit the tax return to HMRC 12 months after the end of the accounting period. Businesses must pay the corporation tax nine months and one day after the end of the accounting period. The corporation tax rate payable will depend on the size of your company. 

National Insurance Contributions 

Individual taxpayers must pay National Insurance Contributions (NICs) to qualify for certain benefits and the state pension. If you are aged 16 or over, self-employed and earning above the personal allowance or you are employed and earning above the ‘primary threshold’ you must pay NICs. 

There are four types of NIC: class 1, class 2, class 3, and class 4. You can find more information about each type and their rates in this article. 

Employed individuals pay class 1 NIC through deductions to their pay, which is calculated and paid directly to HMRC by their employer.  

Self-employed individuals may be liable to either class 2 or class 4 NIC and this is paid along with income tax through their tax return. 

Individuals who are not working or earning below the threshold amount for NICs and who want to complete their national insurance record so they can receive a full state pension and other benefits can pay voluntary class 2 or 3 NIC. 

VAT 

Whether you are just starting out or you have been trading for a while, it is important to consider whether you need to register for VAT.  

You must be aware of the two tests, including whether your annual turnover has exceeded the VAT threshold or whether you expect to exceed the threshold in the next 30 days. If you register late, you will have to pay VAT on sales since the date you should have registered. You may also need to pay a penalty. 

Once registered, you will need to submit regular VAT returns through Making Tax Digital for VAT and pay any VAT liability over to HMRC. It is important to understand VAT codes and a bookkeeper can help with ensuring your reporting is correct. 

Payroll and employees 

If you are looking to recruit someone, or already have, you need to consider your responsibilities as an employer. If you decide to run the payroll yourself you must register for PAYE, calculate pay for employees and pay and report deductions to HMRC. As a busy business owner, you can efficiently outsource payroll to save time. 

Payroll can be simple, but it can get complicated when you need to think about sick and parental pay. 

Legal obligations and compliance 

As well as considering accounts and tax, you must also be aware of other compliance. This includes data protection, equalities legislation and health and safety. Seek help and advice where you need it. 

Onwards and upwards 

Now you are equipped with the fundamentals, you are in the best position to grow and succeed. The journey may be rocky so having a trusted professional to support you on the ride is essential. 

How TaxAssist Accountants can help 

TaxAssist Accountants are experienced business advisors who can help you with your business from the start. By working with our teams from the first step we can build that important relationship with you to work together to achieve your goals. 

Last updated: 19th May 2026