Taxation can be an intimidating and seemingly arcane subject. For many businesses, small and large, it’s not a regular subject of contemplation. After all, it might be easier to focus on the core activities of the business rather than worry about dry financial and legal matters.
However, by neglecting tax systems, you could create inefficiencies that will hamstring your operations in the long term. You might also expose yourself to avoidable legal risk.
Let’s take a look at how businesses can stay compliant, while still limiting the burden.
Understanding Key Tax Obligations
To begin with, you’ll need to understand exactly which kinds of tax you have to pay.
For limited companies, a corporation tax on profits is payable. Companies with profits under £50,000 pay a rate of 19%; those with profits over £250,000 pay the ‘main rate’ of 25%.
You’ll also need to pay VAT on many of the goods and services you sell. To pay it, you’ll need to be VAT registered. This is mandatory for businesses with a turnover of more than £90,000, but you might register voluntarily in order to enjoy certain advantages.
Finally, you’ll also need to pay income tax and national insurance on behalf of your employees, through something called Pay As You Earn (or PAYE). This involves docking employees a portion of their wages, and putting the money toward their income tax return.
Benefits of Professional Tax Advice
Getting the best from your tax arrangements often requires specialised knowledge and expertise. This is where the advice of a professional can be crucial. A good accountant will be able to spot obvious errors, which can protect you against legal action, including costly fines. They might also be able to spot areas where you can save money on your tax bill while remaining compliant. For example, you might be entitled to tax relief that you aren’t actually claiming.
Tax Planning for Growth
Getting the best out of your taxes doesn’t just mean thinking about what you owe in the here and now. It also means planning for the future. What are your plans for the future? If you intend to grow the business, then you might look to rearrange your tax affairs at the same time, in order to minimise the burden as you expand. Exactly how you do this will depend on the nature and scope of the expansion. Again, this is something that a reputable accountant will be able to help you with.
Avoiding Common Pitfalls
When businesses run into trouble with taxes, it tends to be for a fairly limited number of common reasons. A failure to keep accurate and exhaustive records can often lead to problems, as can conflating personal and business expenses. Filing late, naturally, can lead to additional costs. Again, these are things that a skilled accountant will be able to help you avoid.
