Stop being self-employed
You must tell HM Revenue and Customs (HMRC) if you’ve stopped trading as a sole trader or you’re ending or leaving
a business partnership.
You’ll need to send final tax returns and tell employees that you’re closing your business.
How to tell HMRC
Tell HMRC you’re
stopping self-employment. They’ll
cancel your Class 2 National Insurance contributions.
Tax returns
You must send
a Self Assessment tax return before
the deadline if
you’re stopping trading as a sole trader or you’re leaving a business partnership.
When you send the return, you’ll need to:
·
work out your trading income
·
add up your allowable
expenses - this may include some
of the costs involved with closing down your business, eg phone, internet and postage costs of letting people know
·
calculate your capital
allowances, including any balancing charges if you’ve sold business equipment or machinery
·
work out if you owe Capital
Gains Tax on any assets you’ve sold
or ‘disposed’ of
·
calculate your final profit or loss
If your business partnership is ending, the nominated partner should also send a final Partnership
Tax Return by the deadline.
You can hire
a professional (eg an accountant)
if you need help with your tax return.
Tax relief
You may be able to reduce your final tax bill by claiming:
·
Entrepreneurs’ Relief -
this can reduce the amount of Capital Gains Tax you have to pay
·
overlap relief - this can prevent you being taxed twice on your profits when you stop trading during a tax year
·
terminal loss relief - this can offset a loss made in your last tax year against your profit in the 3 previous tax years
Find out more
information about overlap relief
and terminal loss relief.
There are other reliefs to
reduce the amount of Capital Gains Tax that you may be able to claim.
VAT registration
You must cancel
your VAT registration if you or your
partnership are registered.
If you employ people
You need to close your PAYE scheme and send final payroll reports to HMRCif
you stop employing staff.
If you’re insolvent
You’ll usually be personally liable for your business debts. Your creditors can take you to court or make
you bankrupt if you don’t pay.
You might be able to find an alternative, eg an Individual
Voluntary Agreement.
Construction Industry Scheme (CIS)
You must call the CIS helpline as
soon as possible if you’re registered and stop trading as a contractor or subcontractor.
Last updated: 8 June 2016