As a business owner whether you’re starting off on your business journey or getting back into it after a hiatus. There are some key areas of your business you need to be all over. One of which is your books. Each and every business revolves around finances. It’s the lifeblood to any business. You need to know what position financially your business is in, what expenses are upcoming and what invoices are yet to be paid. And one of the expenses that every business faces is tax.
As opposed to if you were employed where you just have to focus on income tax which is automatically calculated and taken out of your gross pay, instead in business there are more taxes you need to know about. And it’s important to know how much you’re going to have to pay in tax. If not, you may end up committing to spending more than you can afford on product development or marketing for example and end up putting your business at risk.
There are five main taxes that you need to know about in the business, the first two of which you’ll already be familiar with:-
- Income tax – in business you will pay income tax based on your business’s profits. Once the business’s profits go over the personal allowance which is currently set at £12,500 that’s when you will start paying tax. It’s also important to note that if it is a limited company you will also potentially be liable to pay income tax on any salaries or dividends that are taken from the business.
- National insurance – this isn’t by some referred to as a tax but as it is money that is owed the government it can be seen as so.
- Corporation tax – if your business is a limited company you will be liable for paying corporation tax, at the moment the rate stands at 19%.
- VAT (Value Added Tax) – this tax applies to all businesses and currently stands at 20% after it was raised from 17.5%.
- Business rates – this is the last tax you need to know about as a business owner. Business rates will be applicable to bills you pay on things such as rent, premises, utilities and much more. Although if your premises are part business and part domestic, for example, a pub, you won’t have to pay business rates.
If you want to know more about what taxes your business needs to be paying so that you can be prepared for when the times comes where you have to pay these taxes why not get in touch with a member of the team here at D&K Accounting.