New businesses are under the same regulations as established companies. In other words, saying to the HMRC that you “didn’t know” there would be business tax to pay just isn’t going to cut it. If you really want to know what type of taxes you’re going to face, this is the guide for you.
The first tax that you’ll need to be aware of would be Corporation Tax. This is the tax your company has to pay on taxable profits. The process of doing business and getting money from it is referred to as trading profits. Then you have the investments that the company makes. If you decide to sell off company assets, then you have to include that as taxable profits if you gained anything out of them.
You have to pay Corporate Tax on all your profits from around the UK and even abroad. There’s no way to shelter money from your company and make it not subject to Corporation Tax. When you start the company you have to set up for Corporation Tax from the beginning, so the HMRC can collect taxes properly. Stiff penalties arise when Corporate Tax isn’t paid in a timely manner. Keep in mind that you have to look at the deadlines for paying and filing your Company Tax Return. It will be different for every company depending on how your financial year is set up. You also don’t get a bill for Corporation Tax. You have to work out how much your company will owe. There are Corporation Tax reliefs available, which reduce taxable profits. You also want to look up your Corporation Tax Rate. You’ll need to figure out your company’s taxable profits through an annual account. They’re not that difficult to prepare, and HMRC provides a template that you can use.
New companies may not have anything to pay, and the temptation here is to do absolutely nothing at all. But that’s really a bad way to go, because the HMRC will penalize you if you don’t speak up. You have to file your Company Tax Return and indicate that no money is due.
Sometimes a company will stop being active and go into a non-trading position. If that’s the case and you aren’t receiving income through the Corporation anymore, then you will need to get a letter from HMRC specifically designating you as dormant, and therefore not needing to pay the Corporation Tax or file the tax returns. But if they tell you that you still need to file the tax return, make sure that you do that.
If your company has taxable profits of less than 1.5 million pounds, you have to pay your taxes nine months and one day after the end of your accounting period. Whether you start a new fiscal year on Jan 1, June 1, or October 1, you always know when your taxes are due.
Be aware that you have to report regularly changes to your business as well. An accountant can help you wade through these waters, but you want to make sure that you’re being as complete, through and honest about things. It’s better to pay on time than to deal with automatic penalties.