Business Tax, VAT & Income Tax
When are you required to pay for Corporation Tax?
The current UK Corporation Tax rate is 19% (2019/20), it is paid on profits if it’s a limited company. A foreign company with a UK branch registered as a limited company in the UK also needs to pay tax on their profits. So does a club, co-operative or other unincorporated association such as a community or sports club.
You have to register for Corporation Tax when you start doing business or restart a dormant business. If you start an unincorporated business write to HMRC to inform them about it.
Corporation Tax is worked out after you have deducted all your expenses from your income, a rate (19% -2019/20) of corporation tax is calculated on the profit and filed for as a Tax Return. The information passed on to HMRC notifies them of the company’s outstanding tax bill. It is important to keep good records of your business transactions not only is it good for filing the right tax or accounts but it helps you as a business owner know where your finances are heading.
Once the Corporation Tax is filed through your tax return you have to pay if you made a profit. Even if you have nothing to pay because the business made a loss or broke-even you still have to file a tax return for HMRC to know there is no Tax due. The deadline for paying Corporation Tax returns or reporting there is nothing to pay is usually 9 months plus one day after the end of your accounting period.
What does VAT mean to your business?
The standard VAT rate is 20% (2019/20) for most goods and services in the UK. There is a reduced rate of 5% for some goods and services usually children’s car seats and home energy. Other goods and services such as food, children’s clothes and books are 0%. It is important that as a business you charge the right VAT. If you don’t, you run the risk of paying for the VAT that you should have charged your customers. Because HMRC deems is your duty to charge the right VAT they will not ask your customers to pay for any gap in the VAT charges if they find one, the onus rests on the business. You are required to always show the VAT information on your invoice. The threshold for registering for VAT is £85,000 or more sales (2019/20). All VAT transactions should be recorded in a VAT account. The VAT account makes it easy to analyze and make returns from it. If your business sells only VAT-exempt goods and services then you are not allowed to register for VAT.
How you can pay your employees?
If you are an employer you will need to use the HMRC PAYE online service to send payroll reports to HMRC. These reports are sent via Real Time Information (RTI) when the payroll is completed. This updates the PAYE system so that it is easier, quicker and more accurate. Employers are notified about tax codes and notices about their employees. Tax and national insurance contributions due to be paid to HMRC and due on the 22nd of the following month. HMRC send alerts to businesses when they report the payroll or make late payments.