Small businesses are currently seen as the engine of economic growth and job creation in UK. This is why the Labour Government has focused strongly on making taxation for small business an avenue for enterprises to grow and progress. However, it is still essential for small business owners to ensure that operations remain in compliance with government laws and policies.
The UK business taxes vary depending on the type and size of your business or corporation. All small businesses and their owners are subject to a wide range of taxes, including corporate taxes and National Insurance taxes.
Here is a short overview of some of the main types that most small business owners encounter during taxation period:
This is the tax imposed upon limited companies’ taxable income or profits. Corporation Tax requires you to calculate your business’s own tax liabilities then pay for it to the Inland Revenue.
Companies with an annual profit of up to £300,000 are to pay their Corporation Tax at the Small Profits Rate of 20%. For the first time in decades, the main rate of Corporation Tax—for profits of £1.5 million or more—has also been reduced to the same rate as the Small Profits Tax.
Value Added Tax (VAT)
This is the tax on the final consumption of specific good and services in the local market. This is collected at all stages of production and distribution, which is why most business-related good and services are subject to VAT.
While there are a number of UK VAT rates, the standard rate remains to be 20%. To learn more about the VAT you should be paying and charging, you may want to consider seeking assistance from accountants and business advisers to ensure that your transactions remain to be in compliance with taxation laws.
To fund State benefits such as the NHS, the State pension and several other welfare schemes, the government developed the National Insurance. The National Insurance Contributions or NICs deduct from the business owners’ earnings.
Pay As You Earn or PAYE was developed and is currently operated by the HRMC or the Her Majesty’s Revenue and Customs. Its focus is to require employees to pay income tax as they earn it.
Sole traders are exempted from the PAYE. However, if you are a business owner of a limited company and are receiving a salary, then you are subject to the PAYE. It is a generally complex subject, which is why it is best to seek help from business advisers and accountants to assess your specific condition.
Different types of transfer transactions done by the small business may require owners to pay stamp duty taxes. This is for transfers of land or land interests, grants or assignments or changeable securities like company shares.
Two types of Stamp Duty:
- Land tax – applicable to purchasing or renting or premises
- Reserve tax – applicable to purchasing shares or other securities
Capital Gains Tax
Also known as the ‘entrepreneurs relief’ scheme, CGT allows business owners to pay a rate of 10% on business disposals. They are also given a lifetime allowance of up to £10 million. There is more to the CGT that might be best if discussed with professionals. To ensure that you are getting the returns and benefits your business deserves while paying the right rate, contact your accountant now.
Your small business may not be subject to some of these taxes, but may still be subject to taxes not mentioned here. Your best move is to speak to professionals and experts and receive advice and assistance on this complicated subject. Contact our specialists now to ensure your tax planning and management strategies remain efficient and up to date.