Taxes For Small Businesses

Taking the leap to start your own business is really exciting and life-changing, you get to pretty much be your own boss and do things your own way.  However, as exciting as it may seem there are a few serious things you have to get to grips with to make sure everything runs as smoothly as possible.

We’ve noted below some quick explanations for small business taxes to help you get a better idea what you need to pay.  We can help you with your business taxes to make sure you’re on top of all your finances.

Corporation Tax

This is applied to a limited company’s profits after employees’ salaries and other business related expenses have been paid out, but before dividends are withdrawn.

You don’t need to pay Corporation Tax if you’re a sole trader.

Corporation Tax is usually paid annually with UK-based limited companies submitting an online form to HMRC.  The form is called a CT600 and will contain details of your company’s income without any tax allowances and expenses.

Your Corporation Tax is due nine months and one day after your trading year ends.  However, you can pay this earlier which we would definitely recommend as there can be fines if it goes through late.

Income Tax

This is paid on certain income you receive personally.  It’s not payable on asset sales such as buy-to-let properties as this would be taxed under Capital Gains.

Income Tax will be taken at source through your company’s PAYE scheme if you draw a salary above the personal allowance as a limited company.  All company directors have to complete an annual self-assessment in which dividends will be taxed through.

Income Tax is to be paid on all the profits on your annual self-assessment tax return if you’re a sole trader.

The payment should be made to HMRC before 31st January annually.

National Insurance

Your contributions to National Insurance help build up your state pension entitlement and also go towards paying for public services.  Everyone needs to pay National Insurance, however only if you are over 16 and are making a profit equal to or above the current primary threshold.

Your contributions will be taken via PAYE if you’re a limited company director.  However, for sole traders, it is calculated in the annual self-assessment you’re required to complete.  


VAT (Value Added Tax) is the sum that is added to most goods and services you come across.  You must charge VAT to customers if you’re a VAT registered company, however you can reclaim VAT they have paid through your business expenses.

You don’t need to register for VAT unless your company’s annual turnover is above the current threshold.   Your company will not be automatically be registered either.

Once you register, VAT is paid quarterly.  The money that is owed must be paid online within 37 days of the end of each quarter.

You must submit a return if you’re registered for VAT even if you don’t have any to pay or reclaim.

The VAT Flat Rate scheme simplifies VAT reporting for small business which can be beneficial for those who have a turnover of less than £150,000.  This would mean there is no need to record VAT for individual sales or purchases.

You can still charge the basic rate of VAT this way but only pay HMRC a flat percentage rate, resulting in an increase in take-home pay.

Business Rates

You’re more than likely going to have to pay business rates if your business is run from a non-domestic property such as a shop, office or factory.

Each year around February or March you’ll be sent a business rates bill for the tax year that starts in April.  You can pay in different ways which will be highlighted on the bill, for example, there is an option to pay in monthly instalments.

If you need more information or any help with these taxes then please call our Milton Keynes accountants on 01908 046964.