When all businesses first start out, it’s essential to make every penny count. Profits can often be small and overheads can be costly, so being aware of all potential outgoings and mitigating unnecessary spending wherever possible is key.
When it comes to paying tax, things can quickly get complicated. There are a number of considerations to take into account, but if done correctly and diligently, there’s no reason why paying tax should hamper your business’ ability to grow.
So, with that in mind, let’s take a look at the tax essentials that you need to be aware of.
1. Income tax
Not all types of income that you earn will be taxable, but much of it is. Earnings that you gain via employment, the majority of pensions, any income that you receive via a trust and pretty much all interest that is accrued from savings will be taxable. You will generally pay this via an expense form that should be filled in and returned once a year. If you are doing this, then the deadline for submitting said form is January 31 if you do it online, and October 31 if you are going to send a paper copy.
2. Corporation tax
Any limited company or foreign organisation that has a branch/store/arm in the UK must commit to paying corporation tax. You tend not to be sent specific bills in the post to encourage you to pay this tax, so you’ll have to be diligent and do it yourself. The deadline for paying this is different for every business but tends to be 12 months following the end of your last accounts period.
If you are a business that is focused on selling a product or service, then you may have to charge customers VAT. Some businesses or products can be exempt from this, so it’s worth checking the government’s official guidance.
4. National Insurance
Paying National Insurance is something that most businesses will have to pay. If your business has any employees, then you will need to give certain contributions on their behalf when you give them their salaries.
5. Business rates
If you are using a property for your business that is not a domestic property, it’s likely you’ll have to pay business rates. If you are registered with your local council properly then you will likely receive a bill from them once a year.