Any new business owner of a limited company must understand the basics of Limited Company Tax along with any other tax obligations as it is crucial for the daily operations of a company. Business heads of companies have to come across different types of taxes while setting up operations, but that doesn’t mean they can’t be conquered. Companies can avail numerous tax benefits, by corporation tax return outsourcing, year-end account outsourcing and other bookkeeping companies in UK, therefore they must be well-versed in the intricacies and nuances of limited company tax requirements and their implications. Firstly, it is important to bear in mind that when owning a company, a distinction has to be drawn between personal and business taxes. The taxes will be separated between the taxes that have to be paid on personal finances such as salary and income and the taxes the company has to incur. The company has to be responsible for managing their obligations and register promptly to pay taxes on company income.
Here is a guide on the various taxes that companies will come across:
1) Corporation tax: All companies have to pay corporation tax on the profit they make. They have to register to pay corporation tax annually and complete the company corporation tax return formalities. Companies must keep accounting records and prepare a company tax return to work out how much Corporation Tax needs to be paid. The tax must be paid by the deadline which is nine months and a day after the end of the accounting period. The current corporation tax for company profits is 19% which is a standard rate for all businesses. They can also get it managed by corporation tax return outsourcing.
2) Value Added Tax: As per the 2018-19 accounting threshold, companies are obligated to register for Value Added Tax with HMRC if their annual income is over 85,000 pounds during the twelve- month period. Once a company registers for VAT, it has to add the current VAT rate which is 20% to their invoices and has to deduct that amount before paying the rest to HMRC. Small businesses with annual income less than 150,000 pounds can benefit from the Flat Rate scheme which provides simple accounting with a fixed rate which can be easily deducted. There is also the cash scheme where the VAT only has to be paid to HMRC after they received payments.
3) PAYE/ National Insurance Contributions: The company will be required to set up payroll. If the employees receive a salary, then income tax and National Insurance Contributions will be deducted and paid to HMRC on a monthly or quarterly basis. If there are no taxes due for that period, HMRC must be notified of that information.
Apart from the above taxes, Tax has to be paid on personal income in the form of salary or dividends from the company. The Self-Assessment has to completed by January 31st, which is the deadline every year. The year-end accounting outsourcing services comes handy here. Although the tax seems complicated, it is imperative to create a solid business plan, keep all paperwork organised and employ an efficient accountant to invite success to the business.