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What business taxes do I need to consider when starting a company?

There are different types of taxes which businesses need to pay, some of them being optional unless your turnover is above a particular threshold or you decide to register voluntarily to pay for them. Learning what taxes are applicable before opening your own business is primordial, since it will allow you to reserve money to be able to pay for them.

Mandatory taxes

All businesses need to pay taxes on both the company payroll and the profits which they make. Business corporation tax In the UK, corporation tax is paid yearly, based on the profits which the company made during its tax year. Corporation tax needs to be filled by 12 months after the corporation tax period ends, and paid within 9 months, which means that you are liable to pay for corporation tax even before filling the relevant paperwork. If you are a start-up business, you may be able to benefit from a reduced rate during the first year. Payroll taxes Any business which has staff, even if it's just yourself, is liable to pay taxes, based on the payroll. You will need to deduct income tax and national insurance contributions from your employees and pay HMRC monthly. If your employees earn over a certain threshold, you'll also be liable to pay for Class 1 NICs.

Optional taxes

Only some companies are liable for the following. Ignorance is not an excuse for non-payment, so you should consult with your accountant or financial advisor about your particular tax liabilities. VAT As a business, you only need to pay VAT once your turnover has reached a certain threshold, updated yearly on the HMRC website. However, you can register to pay for the VAT voluntarily, either on the flat rate scheme or the conventional VAT system. Why would you register to pay for tax voluntarily? Being VAT registered allows you to claim back the VAT you pay on business purchases against the VAT which you charged your customers. Council tax at business rates You may be liable to pay for business rates of the Council Tax, depending on the type of premises which you operate from. Owning a home base business doesn't necessarily mean that you need to pay business rates on your own residential home. However, if you actually rent business premises or use a large part of your house to conduct businesses, then you may be liable to pay for business rates council tax on the part of the house which you are using. Capital gains You may be liable to pay capital gains on any earnings from selling your main residential house if you use a part of it exclusively for business purposes.

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