Small business owners in Cheltenham and the rest of the UK need to understand a number of important business tax rules. Understanding business taxes is vital for running an efficient and compliant business, but it can be difficult to work out which taxes apply to your organisation, since tax requirements vary depending on the financial performance of your business and your business type.
So, what do you need to know to get started with your small business tax? Here we take a quick look at the different types of tax, how to know what applies to your company, and how to pay them.
Different Types of Business Tax
There are a few main types of tax. One is corporation tax, which is paid by all limited companies, as well as unincorporated associations making a profit. The next is VAT – value added tax – which is taxed on turnover of above £85,000 a year. There are business rates, PAYE – pay as you earn (which is an amount taken from salaries), income tax and national insurance. You'll need an accountant to work out how much you owe, and if your turnover is at or above £85,000 then you need to register for VAT. PAYE is needed if you employ anyone in your business. Income tax is basically a tax on your income, and you need to pay it for any income that you earn as a sole trader, partner, or director.
Which Tax Applies to Me?
According to Cheltenham accountants, if you are a sole trader, you need to pay income tax on the taxable profits generated by your business. There is a personal allowance, below which you will not pay tax but the rate of tax depends on your profit levels. If you are a private limited company you need to pay corporation tax, and partnerships need to pay income tax on profits for each partner. VAT, as described above, is payable on turnover above £85,000.
How Should I Deal With Tax Requirements?
It is important to understand what you need to pay and when. It is also important to have the funds set aside in order to be able to pay on time. Some tax situations for small businesses are simpler than others. For example, a sole trader with a low income who doesn’t employ anyone else and who doesn’t use their premises for their business will generally have simpler tax requirements than a partner or a limited company.
In all cases, it is always worth consulting professional accountants to ensure that you are paying the right tax, and that you are getting the most from your various tax allowances and benefits. Accountants are more than just number-crunchers, employed to fill out tax return forms. They can also act as trusted business advisers that can help you grow your company. Once you are ready to start in business, the advice from respected accountants is invaluable to your success, and growth.
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