The type of tax you are required to pay and the way in which you will pay it depends on the structure of your business. Let’s look at some of the taxes that may apply in your situation.
Corporation Tax
If you are a limited company, you will be required to pay corporation tax on all profits earned. This is calculated after certain business expenses have been paid, including salaries and pension contributions.
If you are liable for corporation tax, you must supply HMRC with a completed CT600 form which will detail your income, deductions and expenses. This form must be submitted within 12 months of the end of your accounting period.
VAT
Value-added tax applies to most services and goods. There are some goods that have a 0% rating, including children’s clothing and food, and other goods that are VAT exempt such as property transactions and postage stamps.
Businesses with an annual taxable turnover that exceeds the £85,000 VAT threshold must register for VAT. If this applies to you, you will need to apply a VAT charge to the prices of your services or goods.
You may find it beneficial to work with a team of professional accountants Chippenham, such as Chippendale and Clark, who can help you to keep accurate financial records and ensure that you’re paying the correct taxes and rates.
National Insurance
If you have employees, you will need to pay National Insurance contributions. For each employee earning more than £12,570, you can expect to pay 13.8% directly to HMRC.
Sole traders can pay their National Insurance bill when submitting a self-assessment tax return. Whether you will pay Class 4 contributions as well as Class 2 contributions will depend on your profits.
Dividend Tax
If you are a shareholder, you may choose to pay yourself in dividends. If you’re paying yourself more than £1,000 in dividends, you will need to pay tax. The amount you will pay depends on which tax bracket you fall into, but this will range between 8.75% and 39.35%.