What you need to know about business tax

 

Whether your business is set up as a sole trader, partnership, or company, you will be subject to various taxes as part of UK tax law.

How much business tax do I have to pay?

The types of tax that your business may be exposed to are:

• Corporation Tax
• Value Added Tax (VAT)
• Business rates
• Capital Gains Tax (CGT)
• Dividend tax
• Income tax
• National Insurance Contributions (NICs)
• Stamp duty

There are also allowances that are applicable to businesses such as Business Rates Relief and Business Asset Disposal Relief that may reduce your tax liability.

Will your business need to pay Corporation Tax?

Corporation Tax is only paid by companies registered in the UK and international companies with UK offices.

It is a tax on the profit of the company, this is total revenue minus expenses. The onus is on the business to complete an annual company tax return (CT600) and pay what is due. For most businesses the return must be completed with HMRC within a year of the anniversary of the company registration, however the tax due must be paid within 9 months and one day of this date, so it is worth getting the return done earlier.

Different timescales apply to large companies.

The current rates of Corporation Tax can be viewed on the Tax Data Card download at the end of the article.

What are business rates and do I have to pay them?

Business rates are like council tax for commercial properties.  The amount payable will be determined by your local council and based on the properties ‘rateable value’ which is the open market rental value of the property.

You may be eligible for small business rates relief if the rateable value of your business property is £12,000 or less, and it is the only property that your business uses.  There is also a graduated relief on properties rated between £12,001 and £15,000.

What tax do I pay when selling a business?

When selling a business in the UK it is essential that the sale process complies with HMRC and Companies House rules, this will ensure a smooth and tax-efficient transaction.

If the seller makes a capital gain on the sale it will be subject to Capital Gains Tax, however Business Asset Disposal relief can be applied.

Any profit from the sale should also be considered for Inheritance Tax planning.

How much tax do I pay on dividends?

If you own shares in a company, you may get paid in dividends from those shares.

You do not pay tax on any dividend income that falls within your personal allowance.

There is also a dividend allowance that can then be applied. You only pay tax on any dividend income above the dividend allowance.

The current dividend allowance, and rates that are payable after this has been reached, are available on the Tax Data Card download at the end of the article.

Business tax is a complicated area, with some businesses being subject to many different types.  The thresholds your business will fall into, and the allowances available, are subject to change by the government at any time.

If you want to ensure that your business is paying the right amount of tax, at the right time, it is worth investing in the services of an accountant.

Please contact us for a no obligation meeting to discover how Stephenson Smart can help with your business tax.

Download: Tax Data Card 24-25