A Beginners' Guide To Business Taxes

You do not have to own or manage a business to be affected by business taxes. The taxes that are levied on businesses affect your wages and the price of purchases that you make in shops, so it is a good idea to understand what they are and how they work. Of course, if you do happen to run a company, knowing which taxes you need to pay is essential.  This article covers the main taxes that affect all businesses as of 2009/10.

Corporation Tax

Corporation tax is levied on the taxable income or profits of limited companies (businesses that have separate finances from their owners). Companies must calculate how much corporation tax they have to pay the Inland Revenue (it is currently 21%) and it is due 9 months and one day after the last day of the business’ annual accounting period.

Value Added Tax (VAT)

When a business sells a product, there will be a difference between how much it cost to produce and the price it is being sold for – this is the profit that it makes. VAT is a tax levied on this profit and applies to most types of product. There are different VAT rates, but the standard is currently 15%. A business must register for VAT if its total income exceeds £68,000 in one year.

Business Rates

If you own or rent a house, it is likely that you have to pay council tax. Businesses must pay the equivalent tax on their premises. This can be a high expense, but luckily for smaller companies the government sets a threshold on the value of properties (currently £15,000). If the value of premises is below this threshold, the business may gain a tax relief.

Stamp Duty

Stamp Duty is a tax levied on transactions that involve land, interests in land, leases and securities such as the shares in a company. In plainer terms, there are two types of Stamp Duty; a land tax and a reserve tax (the latter simply covering things such as the ownership of a business).

Capital Gains Tax

Some assets that a business owns might lose their value over time, such as a piece of machinery. However, other assets such as land or property may increase in value. Capital Gains Tax is an 18% tax on any value increases that a business might have.

What About Sole Traders?

Sole traders have other taxes levied upon them because they are self-employed. They will have to pay National Insurance Contributions and income tax on their business’ profits because their finances are not separate from their business’.