If you own a business then you need to be clued into what kind of tax you need to be paying along with how to pay the taxes that you owe and have to declare.
In this article, you can find out all information about taxes that your business might need to pay, depending on various factors. To learn more about taxes for your business and how to pay them, read on.
Your Business Taxes
If you are a business owner, there are several different taxes you will have to navigate around. These taxes include the following:
- VAT
- Corporation Tax
- Income Tax
- Business rates
- Employers’ National Insurance contributions
- Capital Gains Tax
What your business will have to pay will largely vary from one business to the next. This will include how your business is set up, if you have employees, your assets and premises, along with other factors.
What Will I Be Taxed On?
Mostly, your business will get taxes on the profits that you make. This includes the net amount of money it makes after all expenses and losses.
If you are a sole trader or partnership, you will pay income tax as well as the National Insurance contributions if you employ others.
You should keep accurate business accounts on file so you are knowledgeable about your business numbers and therefore can declare your taxes effectively.
What is VAT?
VAT stands for value-added tax. This is added to most goods and services that we buy. When a business is turning over £85,000 or more, you must be VAT registered. Although, you can register for VAT voluntarily if your business is smaller as there can be some advantages to doing so.
Once your business is VAT registered, you must charge it on all goods and services that you sell. A VAT return will be completed to HMRC at the end of each tax year to receive the bill for the total you owe.
You can claim back the VAT on products and services that you buy if your input tax is greater than your output tax. In cases of these, you can reclaim the difference from HMRC in your VAT return.
What is Corporation Tax?
A limited company business must pay corporation tax on the profits it makes. This includes trading and investments too. From the time of writing corporation tax is currently 19% on its profits minus expenses if your business’ profit is £50,000 or less. If your company makes more than £250,000 profit then you will pay the main rate.
When you set up your limited company will register for this tax. This should be done within three months of trade.
Your Company Tax Return must be done by a deadline to avoid paying fees. Sole traders and partnerships will not pay corporation tax but instead will pay income tax and capital gains tax.
What Is Income Tax?
Limited companies are subject to income tax. Income tax is the tax you pay on your income. If you take an income from your business there are two main ways to take your income from your limited company. These are through a salary or dividends.
A salary is subject to income tax, but as you can set your salary, there are ways to reduce the amount of tax you have to pay. You can pay yourself a salary up to your Personal Allowance which would be free from income tax but subject to employee NI contributions.
A more tax-efficient method of paying yourself an income from your business is through dividends from company profits. This refers to a portion of the profits that are paid to all shareholders. This means, for example, if you own 60% in shares of the company, you can receive 60% dividends.
The first £2000 out of your dividend income you can receive in a tax year is tax-free, after this, it is subject to dividend tax.
How to Pay Business Taxes in the UK?
HMRC accepts payment for your taxes in several ways, some may take longer than others to process so bear this in mind when choosing which method to use. You can choose to pay your business taxes:
- Online
- By telephone
- Direct debit
- CHAPS
- Bacs
- By bank or building society
To pay your business taxes in the UK, you will need to pay and declare your profits or losses before your year-end tax return. To do this, you will submit the CT600 form to HMRC. This form is made for declaring these things and is a self-assessment tax return form.
You must complete this self-assessment tax return within 12 months of the end of the accounting period. You will outline the details of your company profits, expenses as well as salaries.
The corporation tax rate for business profits is currently 25% and is applied to the accounting period.
LJS Accounting Services Can Help
As you are responsible for getting your business’ taxes right and all correct, it can be a daunting or overwhelming task, especially when you don’t know the systems very well or cannot keep up with the ever-changing tax situations.
This is why having a dedicated accountant to help you navigate your way through your business’ taxes and apply to HMRC on your behalf. It can free up a lot of your time and take the stress and hassle away from you, leaving you to concentrate on your business and what you are best at.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
