When do I need to tell the Revenue that I have started a business?

If you start the business as a sole trader or partnership you must inform the within three months of starting otherwise you may have to pay a penalty of £100.

You will also have to start making Class 2 National Insurance contributions of £2.20 per week for 2007/08.

Often setting up a monthly direct debit is the most convenient way to pay this.

If you expect your turnover to exceed the VAT threshold (From 1 April 2007 - £64,000), you will need to apply for VAT registration.

If you take on an employee, you will need to contact them to set up a PAYE payroll scheme so that you can deduct and pay over the tax and national insurance on the wages paid.

If you start the business by registering as a limited company, the Registrar of Companies will notify HM Revenue & Customs (HMRC) of the existence of the company.

HMRC will then contact you for more details. The company will have to set up a PAYE payroll scheme, because as a director of the company you are an employee of the company.

Salaries paid to directors are then subject to deduction of tax and national insurance.