Tax can seem like a bit of a minefield for new business owners. The last thing you want to do is erroneously pay the incorrect tax and thus find yourself facing a huge fine as a result. This is why all businesses are advised to hire a chartered accountant in London. Nevertheless, whether you hire an accountant or not, you still need to be aware of the taxes you are liable for. You certainly don’t want to have your head in the sand. So, let’s take a look at the various taxes you will have to pay…
National Insurance– First and foremost we have National Insurance. National Insurance Contributions were set up in order to fund a number of state benefits. This includes the State Pension and the NHS. There are various different types of National Insurance. However, Class 1 is the most common. This involves a primary contribution from the employee and a secondary contribution from the employer.
Value Added Tax (VAT)– Next we have VAT; this tax affects most business related goods and services. The tax is collected at every stage of production and distribution, however it is technically a tax on the final consumption of goods and services. At present the annual threshold is £81,000. So if your taxable supplies exceed this amount you need to register and pay VAT. There are a number of VAT schemes available in the UK to make payment easier.
Corporation Tax– This is a tax on taxable profits and income for limited companies. There is a small profits rate of 20 per cent for companies that make an annual profit that amounts to less than £300,000 per year.
Stamp Duty – Stamp Duty is tax that must be paid on interests in land or transactions on the transfer of land, as well as the transfers of securities that are liable to tax, for instance shares in companies, and the assignments or grants of leases. There are two different types of Stamp Duty. The first is Stamp Duty Land Tax, which you will need to pay if you have bought or rent premises. The second is Stamp Duty Reserve Tax. This applies when you buy securities, such as shares.
Pay As You Earn (PAYE)– Next we have PAYE; this is a scheme that is designed to take income tax from employees when they earn it. If you run a limited company this is especially important. You need to understand your obligations, as you are technically an employee of your company, even if you are the director as well. To say this is a complicated subject is an understatement, which is why you are advised to seek the services of a high quality accountant.
Capital Gains Tax – Last but not least, Capital Gains Tax must be paid on business disposals. This is set at a flat rate of 18 per cent. Nonetheless, tax relief is available in the form of the Entrepreneurs Relief.
All in all, hopefully you now have a much better idea regarding the different types of taxes that will impact you as a small business owner. It is especially important to be aware of all the financial matters that affect a small business expecially if you wish to raise business funding . To tackle this on your own, however, is an extremely risky approach to take. Instead, it is worth taking advantage of a fixed fee accounting service. Everything will be taken care of for you and no financial risk is entailed.