How to Make Sure Your Small Business Is Tax Compliant
Paying tax efficiently and punctually is the sign of a healthy business.
Indeed, when you make mistakes or file taxes late, you can leave yourself liable to penalties from HMRC.
These penalties can harm the cash flow and reputation of a small business, while also consuming valuable time. Below, we explore how you can avoid this and ensure your small business is tax compliant.
Common taxes you need to pay
Corporation tax is one of the most important taxes for small businesses to consider. This tax is applied to the profits of the company. It’s calculated after expenses and salaries have been paid, but it’s usually 19 percent of the total profit of the business. Meanwhile, if your company is registered for VAT, then you will have to charge your customers a tax on top of the goods they buy – usually, this is around 20 percent for each item or service. Plus, you’ll also have to pay business rates tax on the property you operate from. Whether you pay yourself in dividends or via income, you’ll have to pay taxes too. Finally, you’ll also have to stay on top of National Insurance payments and capital gains tax too. Outsourcing finance and accounting services to a third-party vendor or agency like CFOShare can solve this problem for companies.
How to pay
There are different ways to pay for each tax. For instance, with VAT you’ll need to submit forms every three months to keep up with tax. But for corporation tax and capital gains tax, you’ll simply need to submit once per year. Meanwhile, there are some taxes related to your business that will need to be paid personally. Dividend tax, income tax, and National Insurance can all be paid via self-assessment or through PAYE. Find out if your company is registered for VAT.
Keeping up with tax changes
Keeping up with taxes and regulations can be difficult. Especially when you’re running a small business – it’s simply difficult to find the time. However, you can hire an accountant, outsource your accounting, or consult professional tax experts to stay on top of all your business taxes.
Tax compliance checks
Tax compliance checks are an incentive to follow this information and get your tax affairs in order. If your business doesn’t tax compliant, HMRC can contact you or your accountant to investigate whether your business is compliant. If action is taken, this can result in a penalty, an additional payment when they find you did not pay enough tax or a refund if you paid too much tax.
Small businesses must be tax compliant. To run smoothly you’ll need to avoid paying penalties or devoting excessive time to correcting your taxes. Just follow the advice above and you should be able to run a healthy, compliant business.