What taxes do I need to pay and when are they due?
What is corporation tax?
Corporation tax is a tax on profits your business makes. The annual accounts are used to work this out. Your sales, minus any allowable expenses, leaves the profit figure.
Currently, corporation tax is 19% of the remaining profits.
This figure is rising to 25% in 2023. However, business with less than £50,000 in profits will continue to pay the 19% rate.
There will also be relief for business with profits between £50,000-£250,000, so they’re unlikely to have to pay the full 25% rate.
When is corporation tax due?
Corporation tax is due 9 months and 1 day after the end of your financial year. Your financial year reflects when you incorporated the company.
Value added tax
What is VAT?
Everybody pays VAT on goods and services, but if you’re VAT registered, you collect VAT from customers to pay the government.
Most VAT schemes allow you to claim back the VAT you pay on business expenses.
What your company paid out vs what it collected is calculated in a quarterly VAT return submitted to HMRC. You then pay the difference to HMRC.
When is VAT due?
Your VAT payment is due 1 month and 7 days after the end of your VAT quarter. The VAT quarters reflect when you first registered for VAT.
Employer’s National Insurance Contributions
What are Employer’s National Insurance Contributions?
When you hire staff or take a salary as a Director (above the minimum threshold) the company becomes an employer and is charged employer’s National Insurance Contributions.
The amount you’ll pay as an employer depends on how much your staff member earns.
Your company may also qualify for the Employment Allowance. This can reduce employer NI liability by up to £4,000 annually.
When are Employer’s National Insurance Contributions due?
You must pay your PAYE bill to HMRC by:
- the 22nd of the next tax month, if you pay monthly.
- the 22nd of the month in which the quarter ends, if you pay quarterly. For example, 22nd July is the payment due date for the quarter that runs 6th April - 5th July.
What is income tax?
The clue is in the name with this one. This tax is based on what you earn as an individual.
Your self-assessment tax return is the method used to work out what you owe in income tax.
Your self-assessment takes into account all your personal income, from bank interest to freelance work; everything must be included.
How much you pay is dependent on how much you’ve earnt in the tax year
*Depending on your income, you may not have to pay tax on interest earned from your savings.
Your return is due January 31st after the tax year it reports. The tax year runs April 6th to April 5th.
When is income tax due?
Your income tax payments are due in January & July.
If you owe more than £1,000 in income tax, in addition to paying the tax you owe for the year, you must make an advanced payment towards next year’s tax bill. This is known as ‘payment on account’. The advanced payment is split into 2 instalments, one due at the end of January and one at the end of July.