When you’ve decided that you no longer want to be self-employed it is important to notify HMRC as if you do not do this they will still expect you to fill out your self-assessment each year.
HMRC will not automatically remove you from self-assessment if you become an employee elsewhere or if you start claiming benefits.
Here is what you need to do:
- Notify HMRC that you have stopped self-employment
- If you are VAT registered you must consider when to cancel your VAT registration
- If you are working in the construction industry you must also notify HMRC that you are no longer working in the construction industry
- Complete a final self-assessment tax return to cover your last period of trading. This will need to be done at the end of the tax year
- If you operate a PAYE scheme for the business, notify HMRC of the date of closure, complete all returns due for the year and pay HMRC any PAYE or NI due for the year
- Pay any outstanding tax
- Keep your business records, usually for 6 years
- Ensure that HMRC has your correct address for the 12 months following the submission of your final tax return. Give HMRC a forwarding address if you move.
You can read more about this here: https://www.gov.uk/stop-being-self-employed
If you sell your business, business assets or property you could in some cases make a capital gain, so it is wise to get tax advice in this case.
The dangers of not notifying HMRC
If HMRC does not know that you have stopped being self-employed, it is likely that they will continue to send you self-assessment tax returns. If you ignore these returns you could be liable for late filing fees and penalties.
In addition, HMRC may create an estimated tax bill to cover what they believe you owe. These estimated amounts are legally due and can only be reduced or cancelled by sending in a tax return within 3 years of the filing date for the return. If this is left longer than three years it may not be possible to change the bill.
