Taxes when starting a business in the UK

Tax is something we’re all too aware of but when you start up a firm you need to be even more aware of it. Abiding by National Insurance rules and PAYE regulations is a massive priority for businesses, and there are other taxes when starting a business in the UK that you have to be aware of.

Register for VAT

All businesses have to register for VAT if it’s taxable turnover for a 12 month period exceeds the threshold set out by HMRC. The current threshold is £81,000 but this changes from time to time. If you think your start up firm will exceed this limit within the first 30 days of operation, you should register for VAT before opening your doors to the public. There are lots of other reasons for registering for VAT, for example if you trade outside of the UK, you have to be registered for VAT. There are of course penalties for not registering, so if you have any doubts get in touch with HMRC through gov.uk.

Corporation tax

This is basically the company version of income tax so you’ll need to be aware of it. The rate levied on your firm depends on the amount of profit it generates. Start-up companies, like other firms, are not immune from this tax but they will probably only pay the basic rate of 20%, that’s assuming your enterprise only makes a £300,000 or less annual profit. The main rate of tax is set at 21% but this only applies to companies earning more than £1.5 million in profit in a given year.

Capital Gains Tax

If you’re already planning your exit strategy, you’ll need to know about Capital Gains Tax. This is the tax paid when you get rid of or sell on an asset so it’ll apply to you if your little start up becomes a firm that rivals want to buy out. This tax is only paid on the profit made from the realisation of an asset’s value when it’s sold on. The tax amount ranges from 18% to 28% depending on the profit generated from the sale minus the Annual Exempt Amount.

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