When you run a business, you need to know more about your tax obligations. Most people think about their end of year tax return and don’t always understand the other taxes that they may be liable for.

Here are three essential taxes that you should understand. These may not all apply to your business but if you are not sure then speak to your accountant.

Corporation Tax

If you are a Limited Company, you have to pay Corporation Tax.  The main rate of corporation tax is currently 19%.

The Corporation Tax rate for future years is:

• 19% for the Financial Years beginning on 1 April 2018.
• 17% for the Financial Year beginning on 1 April 2020.

Value Added Tax (VAT)

Value Added Tax (VAT) is levied on the sale of goods or services by UK businesses. You don’t have to be VAT registered if your turnover is below £85,000. But some companies choose to be registered straight away. The current rate for VAT is 20% if you are VAT registered you need to make a quarterly VAT return to HMRC.

VAT-registered businesses:

• must charge VAT on their goods or services
• may reclaim any VAT they’ve paid on business-related goods or services

If your turnover is above £85,000, you have to be VAT registered and it’s also worth noting that from April 2019 you will need to make a digital submission to the HMRC every quarter, read our blog - Tax Digital for Businesses.

Income Tax – Personal Allowance

The standard Personal Allowance for 2018/19 is £11,850. This is the amount of income you can earn before paying tax.  As your income increases the amount of tax, you need to pay also increase. The Tax bands are shown below:

• You pay a Basic rate tax of 20% for incomes between £11,851 and £46,350
• You pay a higher rate tax of £40% incomes between £46,351 and £150,000
• There is an additional rate of 45% for income above £150,000

You can earn some interest from their savings without paying tax. Your allowance for earning interest tax-free is made up of the following:

• Personal Allowance
• Starting rate for savings - depending on your other income
• Personal Savings Allowance - depending on your Income Tax band

You get this allowance each tax year, so potentially you have another £6,000 tax-free income.

We hope you found this blog useful. If you would like more advice on the amount of tax you pay and particularly on how much tax-free income you may be able to declare, please do contact us by calling 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it..