When you first start a business there is so much to think about. What shall I call my business? Should I be a sole trader, partnership or Limited Company? What equipment will I need? However, one of the most important (and sadly most overlooked) things that you need to consider is the tax you will be liable to pay as a business owner.
Now I’m not a tax expert, if you want expert advice there are several excellent bookkeepers and accountants in our NoLimits Community, but I can give you a run-down of the main taxes business owners in the UK will be liable for.
One final thing to bear in mind before we get started is that tax implications depend on the structure and nature of your business.
Self-Assessment
Ok, if you have chosen to be a sole trader you will have to pay Self-Assessment by the 31st January each year. Self-Assessment payments are calculated based on the net profit you have made as a business owner. As well as paying the tax you owe on what you earned, you will also be asked to make a ‘payment on account’ against your next year’s earnings. This is usually due by the 31st July each year. It is a good idea to ask your bookkeeper to keep a running total of your estimated self-assessment payments due, so you can put the money aside.
National Insurance
Whether you are a sole trade, in a partnership or the director of a limited company you will have to make National Insurance contributions for yourself and your employees. Depending on your company structure, these could be due annually or monthly.
PAYE
If you have staff members you will be responsible for calculating their PAYE which includes their National Insurance and pension contributions. You subtract the amount due from the payment you make to your staff (wages or salaries) and you have to pay it to HMRC by the middle of the following month.
Join the NoLimits Business Community
Are you a business owner looking to take your business to the next level? Join our innovative community of like-minded professionals and gain access to a wealth of valuable resources, including a community portal to chat with other business owners, ebooks, business development software, and growth events that will transform the way you do business. Best of all, these resources are completely free and will be available to you forever.
But the benefits of joining our NoLimits business community don’t stop there. By becoming part of our community, you’ll have the opportunity to connect with other business owners, share insights and ideas, and build valuable relationships that will help your business thrive. Don’t miss out on this amazing opportunity to supercharge your business and join us today!
VAT
Once your turnover reaches £85k you are legally obliged to register for VAT (whatever the structure of your business). You charge the prevailing rate of VAT on all your qualifying products or services. You can reclaim the VAT you pay on anything you buy and at the end of each quarter you calculate and pay the difference to HMRC. Some businesses choose to register for VAT sooner than the threshold for various reasons.
Corporation Tax
If you are a Limited Company you must pay Corporation Tax on your net profit each year. The rate of Corporation Tax changes periodically. It is worth keeping a record of your approximate corporation tax liability each month and putting the money aside for your year end payment.
My two most important pieces of advice when it comes to Business Tax are:
- Get expert advice before you start your business.
- Know what you owe every month and put it aside, so you don’t spend it!
If you would like to meet tax experts in your area why not pop a post in the Feed.
By Duncan McKechnie
Join the NoLimits Business Community
Are you a business owner looking to take your business to the next level? Join our innovative community of like-minded professionals and gain access to a wealth of valuable resources, including a community portal to chat with other business owners, ebooks, business development software, and growth events that will transform the way you do business. Best of all, these resources are completely free and will be available to you forever.
But the benefits of joining our NoLimits business community don’t stop there. By becoming part of our community, you’ll have the opportunity to connect with other business owners, share insights and ideas, and build valuable relationships that will help your business thrive. Don’t miss out on this amazing opportunity to supercharge your business and join us today!