When you are starting your new business in London you know that you’ll have to pay tax. But do you know what kind of tax, how much, and how often? Running a business in London is tough, and it can be difficult to understand the tax rules that are in place. Some tax rules will apply to your business, and others will not. Here are some of the basic types of tax that you may have to pay as a small business owner in London.
- Income Tax
Once profits go over the personal allowance for income tax, you will need to start paying tax on them. There are different rules if you also have income from another job as well as a business or as a sole trader. You can work out approximately how much income tax you can expect to pay.
If you own a limited company then you could have to pay income tax on the dividends or the salary you take out of the business. The amount of income tax you pay depends on how much you take from the company.
- National Insurance
This is not exactly a tax, but it is money that you will have to pay to the government, therefore it is accounted for when you are putting money aside for paying the taxes you need to in London. There are two types of National Insurance contributions, and you need to work out how much you pay, depending on your business structure and your profits. The accountants central London businesses work with will be able to explain how National Insurance affects your balance sheet.
- Corporation Tax
If you own a limited company then you will be required to pay corporation tax on the profits of the business. This kicks in as soon as you make any amount of profit, a flat rate, and it is payable at a specific point every year. Again, you should ask your accountant what to do about this tax. If you are a sole trader you will not pay any corporation tax.
You must register a business, whether you are a sole trader, a limited company, an LLP, or a partnership, when you make over £82,000 a year in VATable sales.
- Business Rates
You pay business rates when you operate your company or act as a sole trader from office premises or retail premises. It is the same as council tax but it is for business premises. You should check with your accountant about this, as there are times when you can get rates relief.