All you Need to Know About Taxation for Small Businesses in the UK

Tax is a very crucial part of any enterprise, irrespective of the scale it is working on. Avoidance or unjustified delay in tax payment could result in unwanted penalties by the authorities of the country the business is operating in. Therefore, having a detailed analysis of taxes and a better comprehension of the same could contribute towards responsible actions and punctual behaviour.

For small businesses just starting, or maybe still on the verge of better growth, taxation could be challenging to focus on, as most of the concentration usually goes into the core activities.

The current accounting tax year in the United Kingdom runs from 6th April 2020 to 5th April 2021.

There is a tax system in the United Kingdom that works on the various tax laws specified in their law and order books.

Let’s see various kinds of taxes in the United Kingdom that small businesses are liable to pay:

Corporation Tax:

The corporate tax rate in the United Kingdom is 19 per cent. This is the tax that the business needs to pay on the profit earned and is paid nine months and one day after the accounting period of a company ends.

Income Tax:

Income tax is a personal tax that is paid on one’s own income like salary and dividends. If you are a director of a limited company, your business PAYE will pay your income tax. For sole traders, income tax will be charged on personal profits included on your self-assessment tax return.

Value Added Tax (VAT)

VAT is not required to be paid unless the business turnover exceeds the threshold of 85000 Euros. It is not a direct tax but a consumption tax added to the cost of goods and services. If you are eligible to pay VAT, then you need to do the needful quarterly. Also, you need to apply for VAT returns within 37 days of the end of the quarter.

National Insurance

National Insurance is a scheme to construct your empire’s pension and pay for public services. National Insurance charges are paid via PAYE in case of Income-tax for a limited company’s director. It is a self-assessed charge given to HMRC by 31st January and part of your payment on account (31st July).

The due taxes of your business are detrimental to your business structure that further specify the kind of taxes one needs to pay.

FinConcile is a team of accredited and seasoned specialists who specialise in accounting, tax, payroll, and compliance. Our team consists of CAs, lawyers, Company Secretaries, and other finance specialists who help accounting firms achieve long-term growth cost-effectively and accurately. Our outsourcing services website enlists all the services with which we assist your small business finances.