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What tax does my business need to pay?

If you own a business of any size, it is inevitable that you will have to pay certain kinds of tax. For new businesses and start-ups, working out which taxes apply to you can be daunting and confusing. Not paying the correct tax or missing deadlines can have very negative consequences to your business. To learn more about the main taxes that businesses pay, continue reading.

Income tax

The most obvious tax that you will have to pay as a business owner is income tax, which is paid on your business’s profit once it goes over the personal allowance rate of £12,500. This tax kicks in if you have no other income. If you have a limited company, then you will pay this tax on dividends and salary that you take from the business.

Corporation tax

If you own a limited company, then you will pay corporation tax on your profits. This tax is set at 19% for 2020 and is payable 9 months and a day after your company’s accounting year ends. If you are a sole trader, you will not pay this tax.

VAT

Every kind of business has to be registered for VAT if they make sales of over £85,000 a year. This tax is currently set at 20%, but there is a 0% rate for some exceptional goods.

Business rates

Business rates apply to you if your business operates from a site such as retail or office premises. Some businesses are exempt from these rates such as farms. Also, if your business is run from home, you won’t need to pay these rates if you pay council tax.

How an accountant can help

Managing all of your business’s taxes and paying them correctly can be a difficult and stressful task. This is why outsourcing your business’s finances to an accountancy firm can be beneficial. An accountant can complete all self-assessment forms for you and make sure that everything is paid on time.

CWR is an accountancy firm based in Lancaster. We offer a range of services to help with your business’s finances including taxation services. For more information, get in touch today.