Starting your first business is a bold step in life, but it’s also fraught with risk. There are many beginner’s mistakes you can make.
A bit of research is enough to help ward off many of them. And for tax purposes — a complex topic a lot of people aren’t naturally knowledgeable about — it’s a good idea to get advice from a qualified professional.
Starting a business—the basics
First of all, when taking this step, you need to consider what your business and industry is going to be.
That’s essential as it defines the type of information you’ll eventually submit to the HM Revenue & Customs (HMRC).
Tax is a major part of business life and is complex enough to put many people off from trying. If you ignore certain taxes, you can end up with major bills or legal situations that can be serious enough to put your business at risk.
The British government provides business and self-employment tax guidance. But for the basics on tax, below are the things to keep in mind — and why all advice you can get is good news.
Tax — the basics
There are five main taxes you’ll have to keep in mind. Tax is complicated in the UK, so simplifying it is an essential part of running your business. 41 Notorious Tax Evasion Statistics [Updated in 2020]
Income tax
This is tax paid by individuals and will apply if you are a director of a limited company, a sole trader or a partner in a partnership
National Insurance
NI isn’t a tax as such, but you must pay it to the government – there are different classes of NI depending on whether you’re employed or self-employed – there are also implications is you are an employer
Corporation tax
Limited companies are subject to corporation tax and generally will pay this on their taxable profits
VAT
Regardless of your business type, you make more than £85,000 in sales each year you must register for VAT. Even if you do not reach to registration threshold it is wise to take advice in this area
Business rates
If your business is in an office or retail premises, you may have to pay business rates to your local authority. It is the equivalent of council tax for householders but applies to businesses occupying commercial premises.
Remember also your responsibilities as an employer to PAYE on employee’s earnings – you might need a helping hand and Naail & Co accountancy firm is here to help.
All of the above taxes come with different registration deadlines and dependent upon your industry, there may well be other things to consider for example the construction industry scheme.
It’s always advisable to take advice from a qualified accountant or tax professional.
Tax saving ideas for your business
Finally, here are some tips on how to master the world of small business tax.
Plus, how you can manage it effectively so you don’t become overwhelmed by your other day-to-day activities:
- Keep on top of your industry guidance and consider the dispensations and allowances HMRC applies to some of them.
- Consider handing your tax documenting duties to a trained professional — as mentioned above, an accountant, bookkeeper or tax professional.
- If your business pays VAT, take advice so that you can ensure that the right amount of VAT is paid and always be mindful of registration limits.
- Don’t get behind! It’s costly and expensive to do so.
- Keep your other obligations in mind.
Don’t be afraid to take advice. Although the initial expenditure may put you off, there are free consultations and from there you may quickly realize it’s the right step for you. It’s worth it in the end!
