The prospect of putting up a business is exciting; you get to introduce an innovative idea or item and be able to earn from it. You also need to prepare yourself and the business for certain financial expectations.
Taxation might seem intimidating to aspiring business owners, but it is an aspect of your venture that requires attention. When you understand the process, you could minimise what you pay and take advantage of tax allowances and reliefs. This way, you meet your legal obligations and still achieve your business’s financial goals.
In learning the different types of taxes, you can also determine the need for appropriate tax funding.
Here is an overview of each one:
Corporation tax refers to your company’s liability in terms of its annual profits. Once you have registered as a limited company in the UK, you will have to file the corporation tax return — also known as Form CT600 — on the last day of your business’s annual accounting period.
The government plans to trim down the tax rate to 17% by the year 2020. For the current tax year, it has lowered the rate to 19%, making it the lowest among the G20 member states.
Capital Gains Tax
The filing of capital gains tax is necessary when you make a profit from the business. It is a requirement whether you are the self-employed sole trader of your business or are in a business relationship.
You may have to pay this tax for business assets such as property, shares and registered trademarks.
Value Added Tax (VAT)
If you are a VAT-registered business, you may charge Value Added Tax for taxable supplies such as business goods and services, hired or loaned goods and commission. You also have the responsibility of reclaiming the VAT you have paid for business-related goods and services.
You may charge three types of VAT rates, namely the standard rate, the reduced rate and the zero rate. You have to charge the standard rate unless the circumstance would require a reduced or zero rate
All businesses are subject to different types of taxes. Be familiar with the ones your small business needs to file so that you secure financial goals and meet legal obligations.