smallbusiness.co.uk: Helping your business think big

Your sole trader profits (or losses) will be taxed under Income Tax rules. You need to keep a record of income and expenses and after your first period of trading a set of accounts (a profit and loss account and balance sheet) will be required. You have three months from the date of commencement to notify your Tax District that you have started a business. At the end of the tax year in which you commenced trading you must complete a Tax Return including a Self Employment section. Basically if your turnover is under £15,000 you only need to fill in figures for turnover, expenses and profits. If the turnover is greater than £15,000 detailed profit and loss and balance sheet figures are required. If you buy equipment you are allowed a proportion of the cost (called capital allowances) as a deduction from your profits for tax purposes. If you are working from home a proportion of the house expenses might be allowable. There may be others who should be advised that you have started in business such as the local authority, your insurance company, etc. If your annual turnover reaches £60,000 you must register for VAT.