Taxation

Business Tax

Q: Do I need to register for VAT and when should I do so?

A: Businesses must register for VAT when their turnover exceeds £52,000. Businesses with a turnover of less than £350,000 per annum can use the cash accounting scheme. This means you only have to pay over VAT on your sales invoices once your customers have paid you rather than from the date of your invoice. VAT is normally accounted to H M Customs & Excise quarterly.

If your turnover is below the registration limit you still may want to register so that you can claim back VAT that is charged to you by suppliers.

HM Customs and Excise provide more information on their website. We can also provide you with a VAT fact sheet, please email us.

Q: What tax does the company pay on its profits?

A: Companies pay Corporation Tax on their assessable profits. These are paid at 10%, 20% and 30% depending on the level of profits. Small companies pay tax nine months after the end of the accounting period. Large companies are required to make quarterly payments on account. Tax losses can be carried forward for use in future accounting periods, subject to some restrictions.

Q: How do I deal with PAYE and National Insurance?

A: You will need to set up a PAYE scheme with the Inland Revenue by calling the New Employers’ Helpline on 0845 60 70 143. The Helpline will send a copy of your details to your local Tax Office who will send you your PAYE and Accounts Office reference numbers.

As an employer, you will be responsible for deducting tax and Class 1 National Insurance contributions from the pay of your employees. You send the tax and National Insurance contributions you have deducted to the Inland Revenue.

You will need to work out the tax and National Insurance contributions due each pay day and then pay this over to the Inland Revenue Accounts Office each month. This can be done quarterly if your average monthly payments of tax and National Insurance contributions are below £600.

Personal Tax

Q: I have just become self-employed, who I did need to tell?

A: You will need to tell the Inland Revenue by completing a CWF-1 form. This tells them about you and your business for both Income Tax and National Insurance purposes. You will automatically receive a self-assessment tax return. You must tell the Inland Revenue of any new sources of income by 5 October following the end of the tax year. If you do not tell the Inland Revenue about being self-employed they will not send you a tax return, but then may charge you financial penalties for failing to pay your tax on time. Tax returns must be submitted by 31 January following the end of the tax year even if they have not issued you with a tax return.

The CWF-1 also notifies H M Customs and Excise. There is further advice on VAT registration on these pages.

Q: I am a freelance designer, when do I pay my income tax?

A: You will be taxed under self-assessment and your tax is payable on the following dates: -

31 January - this is your first payment on account plus any outstanding tax from the previous tax year.

31 July - this is your second payment on account.

You will also need to pay Class 2 National Insurance on a monthly basis. Self-assessment tax returns and the CWF-1, along with many other forms can be downloaded from The Inland Revenue

Q: I am planning to sell my shares in my company in 4 years time, what rate of Capital Gains Tax will I pay?

A: Generally shares in a trading company will attract capital gains tax at your highest rate of tax. You will qualify for a discount on your taxable gain, called taper relief, based on the number of years you have held your shares.

If you would like to ask a specific question or request a more detailed fact sheet please email us.