{"id":141131,"date":"2025-03-18T06:48:43","date_gmt":"2025-03-18T06:48:43","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/beginners-guide-to-business-tax\/"},"modified":"2025-03-18T06:48:43","modified_gmt":"2025-03-18T06:48:43","slug":"beginners-guide-to-business-tax","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=141131","title":{"rendered":"Beginner\u2019s guide to business tax"},"content":{"rendered":"


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With a new business comes new tax responsibilities, and if this is your first time then it can all look a bit confusing.<\/p>\n

So to help you out, we\u2019ve written this quick guide to the main types of business tax you\u2019ll have to pay, how you\u2019ll pay them and what you can do to stay on top of it all.<\/p>\n

So, let\u2019s get to it!<\/p>\n

Tax businesses have to pay<\/u><\/h2>\n

Income tax<\/h3>\n

You\u2019ll pay income tax on your business\u2019s profits. How you pay it depends on your business structure.<\/p>\n

If you\u2019re a sole trader and you don\u2019t have another source of income, you won\u2019t have to pay income tax until your business\u2019s profit goes over your personal allowance (currently at \u00a311,850).<\/p>\n

If you\u2019re operating as a limited company then you\u2019ll pay income tax on any salary or dividends you take from the company.<\/p>\n

If you do have another source of income, then you may start paying income tax sooner. It\u2019ll be paid from your salary (either from your employer or from your limited company) under the Pay As You Earn (PAYE) scheme<\/a>.<\/p>\n

Corporation Tax<\/h3>\n

If you\u2019re a limited company, then you\u2019ll have to pay corporation tax on your business profits. Corporation tax is at 19% for all companies.<\/p>\n

Unlike income tax, there\u2019s no personal allowance for a company so you\u2019ll start paying corporation tax as soon as you start making profit. It needs to be paid 9 months and 1 day after the end of your accounting year.<\/p>\n

What\u2019s the difference between corporation tax and income tax (UK)?<\/strong><\/p>\n

You\u2019ll pay corporation tax on the profit made by your company. You\u2019ll pay income tax on your personal income.<\/p>\n

As a limited company, your personal and business finances will be separate. Sole traders don\u2019t pay corporation tax.<\/p>\n

Recommended read: is moving over to a limited company a good idea?<\/a><\/p>\n

VAT<\/h3>\n

Once your annual turnover exceeds \u00a385,000 you\u2019ll need to register for VAT. This is the case regardless of whether you\u2019re a sole trader, limited company, partnership or LLP.<\/p>\n

We wrote a pretty thorough guide to VAT here<\/a> (and a very thorough downloadable guide<\/a> here).<\/p>\n

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Business rates<\/h3>\n

You\u2019ll have to pay business rates on any office or retail premises you operate from. It\u2019s like council tax for your business property.<\/p>\n

There are a few exceptions to take into consideration. Farm buildings, for example, are automatically exempt from business rates. Other types of property are entitled to business rates relief.<\/p>\n

If you work from home, you won\u2019t have to pay business rates and council tax, unless:<\/p>\n