How Can Tax Affect my Business?

On November 19, 2014, in Financial Information, by admin

When you are setting up a business, whatever type or size of business it is, it will be subject to tax laws.

If you are self-employed, you are responsible for paying your own tax and National Insurance. At the end of each tax year you must fill in a self assessment form and submit it to HM Revenue & Customs online; you will then have until the following January to pay your tax bill. A good way to budget for this is to immediately move 20% of every paid invoice directly to a savings account. That should provide enough to pay your tax bill at the end of the year.

If your income is likely to be above the higher tax bracket (currently £41,865), you will need to pay a higher rate of tax and should therefore save twice as much of your income from each invoice. This is something to bear in mind when you’re setting up your company; it’s wise to put something in place to ensure you are holding back money to pay your tax bill.

If your company has a turnover of more than £81,000 in a year, you will need to register for VAT. This means you can charge VAT on your products or services, and can claim back from Revenue & Customs any VAT you have paid to other companies. It also means you must fill in VAT returns, usually quarterly. At this point you will either have to pay your liability, or will receive a refund.

Limited companies must also pay Corporation Tax on taxable income. This includes income from investments or selling assets at a profit. You don’t receive a bill for Corporation Tax; it is up to your company to calculate how much is due to be paid.

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