Limited company tax
Now you’ve set up a business bank account for all your limited company’s finances to operate from, you need to know exactly what your tax accountabilities are and how you should meet them.
Global Accountancy and Taxation can help every step of the way with both registration and full management of all your taxes when the time comes. Here are all tax-related terms you’ll need to be aware of.
HMRC is where you’ll need to go to register for corporation tax.
This is a type of tax applied to all your limited company’s profits after business expenses have been accounted for. Whilst this tax is applied after expenses, it still comes into play before you’re able to withdraw any shareholder dividends.
No matter the nature of your business, all limited companies are legally obliged to pay tax on any profits they make. This must be done by submitting a CT600 return annually, with the first return needing to be filed within one year of your company’s first year end. Then, once this has been submitted, payment must be made within 9 months of your company’s year end.
It’s not a legal obligation to submit your return straight away but, with regard to tax, it’s generally considered better to submit things as soon as possible as opposed to waiting until the last minute. Whilst corporation tax can be both filed and paid on various dates, if you choose to submit with us, we will automatically submit them on consistent dates to ensure a better tax structure for your company.
Personal income tax
In conjunction with the tax your limited company is obliged to pay, you’re also required to personally pay tax on any income you receive. This can come via a salary from your company or dividends.
Most people choose to submit their self assessment online for ease so, if you choose this method, you must submit it by January 31st following the specific tax year you’re filing for. But, if you choose to post your self assessment instead, you have until 21st October following the specific tax year you’re filing for.
Before you can begin submitting your self assessments, you must register with HMRC and inform them of your personal tax liability. This can be done at www.online.hmrc.gov.uk/login.
VAT (value added tax) is an additional tax sum to the price of many services and physical goods. At the moment, VAT is currently at 20%.
Most people don’t realise that companies aren’t in fact automatically registered for VAT. So, if your annual turnover is higher than £85,000, it’s your responsibility to register yourself. But, if your turnover is less than this you don’t have to register for VAT at all, although you can do so voluntarily if you’re expecting your turnover to rise. There’s also a VAT flat rate scheme you can register for too, but that’s limited to companies with a turnover of less than £150,000 per year.
If you do find yourself in a position to voluntarily register for VAT, it’s important to establish whether or not your clients are registered for VAT themselves. This is because any additional amount you may be charging could have a detrimental effect on their financial situation, and you could lose them as clients if you’re not careful.
If you choose to take advantage of our assistance, we’ll deduct all VAT you’ve paid on expenses from the VAT you’re charging on invoices to give an exact sum of what you owe HMRC for your return.
VAT flat rate scheme
As mentioned, the VAT flat rate scheme was specifically introduced for companies with an annual turnover of less than £150,000. This scheme enables you to pay HMRC a set percentage of your sales dependent on which industry you’re in, and this generally equates to less than regular VAT rate but still allows you to invoice clients at the usual 20%.
In terms of reconciling your VAT, you’re obliged to pay HMRC a percentage of turnover as opposed to calculating VAT for every single purchase. If applicable, your company can then keep any difference that may be present.
If you need help submitting VAT returns or simply want advice, our expert accountants are always on-hand to help.