Paying Taxes for Small Businesses: What You Need to Know
Tax can be a complicated and daunting prospect for small businesses. However, ensuring that you are up to date with your tax obligations is essential, as failure to do so can result in hefty penalties.
The good news is that there is a lot of help and support available for small businesses when it comes to tax. This guide will take you through some of the key things you need to know.
Types of Taxes
There are several different types of tax that small businesses in the UK may need to pay, including:
- Income Tax: This is a tax on the money you earn from your business. It includes money from selling products or services and any interest or dividends you may receive.
- Corporation Tax: This is a tax on the profits of your company. If your company is based in England, Wales, or Northern Ireland, you must pay corporation tax to HM Revenue & Customs (HMRC).
- National Insurance: If you are self-employed, you will need to pay National Insurance. That contributes to your state pension and other benefits, such as healthcare.
- Value Added Tax (VAT): This is a tax on goods and services sold in the UK. If your business is registered for VAT, you must charge VAT on any products or services you sell. You will then pay this money to HMRC.
Registering for Taxes
If you are starting a new business, you will need to register for the relevant taxes. It can be done online via the HMRC website. If you are self-employed, you will also need to register for Self Assessment. It is a system that allows HMRC to calculate how much tax you need to pay.
Filing Your Tax Return
Once you have registered for taxes, you must file a tax return. As a small business owner in the UK, you must file a tax return annually. That can be daunting, but ensuring you are up to date with your tax obligations is crucial.
You need to consider several things when filing your small business tax return, including your business income, expenses, and any capital gains or losses. You will also need to provide details of any employees and any VAT you have charged.
The good news is that several resources are available to help you with your tax return. HM Revenue and Customs (HMRC) offers a range of guidance and support, and several software packages can make the process easier.
If you are struggling to file your tax return or if you have any questions, it’s always best to speak to a professional. An accountant or tax adviser will be able to help you ensure that you are meeting your tax obligations and can also offer advice on how to minimise your tax bill.
Records You Need to Keep
As a business owner paying your taxes, you will need to keep a few different types of records. That will ensure that you are able to file your annual tax return and avoid any penalties.
1. Sales Invoices: These invoices should show what was sold, to whom, and for how much. If you are registered for VAT, you must include the VAT amount on each invoice.
2. Purchase Invoices: These invoices should show what was bought, from whom, and for how much. If you are registered for VAT, you must include the VAT amount on each invoice.
3. Bank Statements: These documents will show all of your income and expenditure, as well as any transfers between accounts.
4. Cash Books: They can be used to record income and expenditure and any transfers between accounts.
5. VAT Returns: If you are registered for VAT, you must file quarterly VAT returns. These should show the total VAT due for the quarter and any VAT reclaims.
Managing tax for small businesses in the UK can be overwhelming. There are several different taxes that companies have to pay, and it can be challenging to keep track of them all. However, businesses can do a few things to make the process a little bit easier. For one, having a trusted accountant can help ensure you pay your dues correctly and diligently.
1 to 1 Accountants is an accountancy firm that provides customised accountancy services for businesses in the UK. We pride ourselves on offering a friendly, flexible, and professional service to every customer. Contact us if you need help with your taxes.