When it comes to tax, we ensure your business is in the best possible shape with our expert planning.
Denver Accountancy are able to offer all the traditional financial, tax and accounting services:
- Tax returns for Individuals and sole traders, Partnerships and Limited Companies
- Tax planning for family businesses
- Advice on your Tax liabilities
- Completing all Tax Returns and Computations
- Dealing with all communication and correspondence from HMRC
Corporation Tax
When you set up a limited company, your annual profits will be subject to Corporation Tax.
Dealing with your corporation tax issues is one of your accountant’s key tasks. However, it is ultimately the directors of a limited who are responsible for ensuring that a company’s tax affairs are in order.
As a director of a limited company, you therefore need to make sure that your company’s corporation tax liability is accurate, your corporation tax return (form CT600) is filed with HMRC on time, and that you pay the corporation tax to HMRC when it falls due.
Who pays Corporation Tax?
All UK limited companies are subject to Corporation Tax. The tax is charged as a percentage of the annual profits made by a company.
Corporation Tax is not paid by businesses operating as sole traders or partnerships. The individuals running such businesses are classed as self-employed and will pay tax on their business profits through the annual self assessment system.
For more details on the self-employment route, read our guides on How to set up as a sole trader and Tax for the self-employed
Corporation Tax does apply to the following organisations, even if they are not incorporated:
Members’ clubs, societies and associations
Trade associations
Housing associations
Groups of individuals carrying on a business but not as a partnership, e.g. co-operatives.
What are the current Corporation Tax rates?
Historically, there were two different rates of UK Corporation Tax; the ‘small profits rate’ and the ‘main rate’. Companies making profits of up to £300,000, were charged at the ‘small profits rate’ which was typically a few percentage points lower than the ‘main rate’ of corporation tax.
Companies with profits of £1.5 million and above paid the main rate of corporation tax, with ‘marginal relief’ being applied to profits between these two figures.
However, this was simplified in April 2015, when the ‘small profits rate’ and ‘main rate’ of Corporation Tax were aligned, giving the UK a single rate of Corporation Tax. This simplification removes the need for marginal relief calculations for tax years beginning after April 2015.
The current rate for UK Corporation Tax is 19% (2017/18). This is 1% lower than the Corporation Tax rate for the 2015/16 tax year, which was 20%.
Income Tax
Income Tax is a tax you pay on your income. You don’t have to pay tax on all types of income.
You pay tax on:
- money you earn from employment
- profits you make if you’re self-employed – including from services you sell through websites or apps
- some state benefits
- most pensions, including state pensions, company and personal pensions and retirement annuities
- rental income (unless you’re a live-in landlord and get less than the rent a room limit)
- benefits you get from your job
- income from a trust
You don’t pay tax on things like:
- interest on savings under your savings allowance
- income from tax-exempt accounts, like Individual Savings Accounts (ISAs) and National Savings Certificates
- the first £5,000 of dividends from company shares
- some state benefits
- premium bond or National Lottery wins
- rent you get from a lodger in your house that’s below the rent a room limit
Income Tax allowances and reliefs
Most people in the UK get a Personal Allowance of tax-free income. This is the amount of income you can have before you pay tax.
The amount of tax you pay can also be reduced by tax reliefs if you qualify for them.
VAT (Value Added Tax)
VAT rates for goods and services
| Rate | % of VAT | What the rate applies to |
|---|---|---|
| Standard | 20% | Most goods and services |
| Reduced rate | 5% | Some goods and services, eg children’s car seats and home energy |
| Zero rate | 0% | Zero-rated goods and services, eg most food and children’s clothes |
The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%).
Business Rates
Business rates are charged on most non-domestic properties, like:
- shops
- offices
- pubs
- warehouses
- factories
- holiday rental homes or guest houses
You’ll probably have to pay business rates if you use a building or part of a building for non-domestic purposes.
Business rates are handled differently in Scotland and Northern Ireland.
What to pay and when
Your local council will send you a business rates bill in February or March each year. This is for the following tax year. You can also estimate your business rates bill.
You can get help with business rates from:
- your council if you have questions about your bill
- the Valuation Office Agency (VOA) if you think your ‘rateable value’ is wrong
Relief schemes
You may be able to get business rates relief from your local council to reduce your bill. This is sometimes automatic, but you may need to apply.
The process depends on whether you’re in England or Wales.
Who doesn’t need to pay
Certain properties are exempt from business rates, for example farm buildings or places used for the welfare of disabled people.
National Insurance
You pay National Insurance contributions to qualify for certain benefits and the State Pension.
You pay National Insurance if you’re 16 or over and either:
- an employee earning above £157 a week
- self-employed and making a profit of £6,025 or more a year
You need a National Insurance number before you can start paying National Insurance contributions.
If you earn between £113 and £157 a week, your contributions are treated as having been paid to protect your National Insurance record.
National Insurance classes
There are different types of National Insurance (known as ‘classes’). The type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.
When you stop paying
If you’re employed, you stop paying Class 1 National Insurance when you reach the State Pension age.
If you’re self-employed you stop paying:
- Class 2 National Insurance when you reach State Pension age
- Class 4 National Insurance from 6 April (start of the tax year) after you reach State Pension age
PAYE
As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.
You don’t need to register for PAYE if none of your employees are paid £113 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records.
Payments and deductions
When paying your employees through payroll you also need to make deductions for PAYE.
Payments to your employees
Payments to your employees include their salary or wages, as well as things like any tips or bonuses, or statutory sick or maternity pay.
Deductions from their pay
From these payments, you’ll need to deduct tax and National Insurance for most employees. Other deductions you may need to make include student loan repayments or pension contributions.
Capital Gains Tax
Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.
It’s the gain you make that’s taxed, not the amount of money you receive.
Example: You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).
Some assets are tax-free. You also don’t have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.
Disposing of an asset
Disposing of an asset includes:
- selling it
- giving it away as a gift, or transferring it to someone else
- swapping it for something else
- getting compensation for it – like an insurance payout if it’s been lost or destroyed
Capital Allowances
You can claim capital allowances when you buy assets that you keep to use in your business, eg:
- equipment
- machinery
- business vehicles, eg cars, vans or lorries
