Individuals who are associated with sole trading or small businesses in the UK are mostly aware of small business tax. You might know about these several types of taxes like VAT to PAYE, however, this does not mean you are certainly sure about which one applies to your structure of the business.

It mostly depends on the type of business your company carry out and then your business performance. This will help to measure the statistics and eventually narrow down to reach the tax type that applies to you. So, it is important to learn what are the unique circumstances you have at work and what pertains to those specific needs. Moreover, this comprehensive guide will explain the following:

• Learn Multiple Types of Small Business Tax 
• The Suitable Type of Tax for Your Business Structure
• Wrap Up

Learn Multiple Types of Small Business Tax

The requirement of tax depends upon the type of business structure you have. Your business profits and income will also make a difference in the specific needs of your company. It is better to consider all the small details like your business is offering services or selling products as well as other specific conditions.

It has been observed that people find it way complicated to figure out the suitable category for their specific business needs. Before delving further into the discussion, we will outline the possible types of small business tax types that your business might require to pay.

Furthermore, this will help you to know the tax relief that you can claim and enjoy the benefits for your business. Here is a comprehensive overview of the types of tax.

• National Insurance
• Income Tax
• PAYE (Pay As You Earn)
• Business Rates
• Value Added Tax (VAT)
• Corporation Tax

National Insurance: This is applicable when you are eligible for government benefits like state pension and others.

Income Tax: This is a kind of tax that is on the business income and it has to be paid by the company if it is applied to it.

PAYE (Pay As You Earn): A business that has a requirement to hire employees. This type of tax is applied to the income that is deducted from the employees’ salaries.

Business Rates: At times your business is run with the use of non-domestic properties. If this situation relates to your business practices, tax on non-domestic properties is applicable to you as well.

Value Added Tax (VAT): A business that offers services or sells products has to pay VAT in case the turnover exceeds the limit of £85,000.

Corporation Tax: This kind of tax refers to the tax that is applicable to business profits and is paid by the corporation.

We’ll help you get your VATs sorted out, get all your taxes filed on time, and let you know when you’re overpaying for any of them.  Talk to our chartered accountants today!

The Suitable Type of Tax for Your Business Structure

After reviewing the type of tax, you must be wondering about the suitable type that applies to your business structure. This depends on the legal structure you choose to carry out your business. This could include any one of the following:

• Sole Trader
• Partnership
• Private Limited Company

Sole Trader: The taxable business profits come from the business, a sole trader has to pay tax on it. This is also a part of self-assessment. This practice is done on annual basis. The tax-free personal allowance limit has to be considered. If you are making any figure beyond this limit, you will have to pay income tax.

Private Limited Company: The limited companies are liable to pay corporation tax on the profits that they are making. The good news is that you can claim certain tax reliefs on corporation tax as well. Some examples include the following:

• Creative Industry Relief, it is mandatory to pass the cultural test to get this relief. Some examples of such creative industries are video game production, museum and qualified galleries, and film production companies.
• Research and Development Relief is applicable when you intend to work with the creative advancement in your field or a project that is mostly related to technology and science.
• Property and income loss relief is applicable when you are struggling with property income loss. The disposal or sale of a capital asset also makes you eligible for this relief.
• Trading loss in the case of publically trading can make a claim as well.

Partnerships: Normally the partnership directors are happened to be self-employed. The share of profits also comes under the responsibility of paying income tax. Here it is important to consider taxable income and personal allowances.

Are you stuck with your taxes? Feel free to get our guys on a quick call. Call us on 020 8686 8876 or email us today.

Wrap Up

Finally wrapping up the discussion of small business tax since you have gathered important information that can help to build basic understanding. The tax process is often considered complicated and we have tried to make it simple in these few minutes of reading.

This can work as a roadmap to figure out the suitable type of business for your business. If you are still in doubt as to when it is due or how much you owe to pay, you can always seek additional help from professionals. We hope this guide will help you to make the right decisions in order to avoid any tax complications in future.

Disclaimer: The information about small business tax provided in this article is general in nature. It does not intend to disregard any professional advice.