UK Tax Planning for Setting up a New Business
Starting a new business is exciting, but it can also be daunting, especially when it comes to tax planning. Understanding the UK tax system and how to legally minimise your tax liability is essential for any new business owner. In this article, we'll discuss the various UK taxes, the tax implications of starting a new business, and how to plan your taxes to ensure you're compliant and making the most of available tax reliefs.The UK Tax System
The UK tax system is made up of various taxes, including:- Value Added Tax (VAT)
- Corporate tax
- Income tax
- National Insurance Contributions (NICs)
- Employment taxes
- Capital allowances
- Research and Development (R&D) tax relief
- Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)
- Inheritance tax
Tax Implications of Starting a New Business
When starting a new business, there are several tax implications you need to be aware of, including:- Choosing the right business structure
- Registering for taxes
- VAT registration
- Corporate tax
- Income tax
- National Insurance Contributions (NICs)
- Employment taxes
Choosing the Right Business Structure
The business structure you choose will impact your tax liability. There are several business structures to choose from, including sole trader, partnership, limited liability partnership (LLP), and limited company. Each business structure has its own tax implications, and it's important to choose the one that's most suitable for your business.Registering for Taxes
As a new business owner, you'll need to register for taxes. The taxes you'll need to register for will depend on your business structure, but typically, you'll need to register for VAT, corporation tax, and self-assessment.VAT
Value Added Tax (VAT) is a tax on consumer spending. If your business has a turnover of more than £85,000 per year, you'll need to register for VAT. There are several VAT schemes available, including the Flat Rate Scheme, Annual Accounting Scheme, and Cash Accounting Scheme, which can help reduce your VAT liability.Corporate Tax
Limited companies pay corporation tax on their profits. The current rate of corporation tax in the UK is 19%. There are severa It's important to keep accurate records of your business expenses and profits to ensure you're paying the correct amount of corporation tax. You may also be eligible for tax reliefs, such as capital allowances, which can help reduce your corporation tax liability.Income Tax
As a self-employed individual or company director, you'll need to pay income tax on your profits. The amount of income tax you pay will depend on your income level and tax allowances. It's important to keep accurate records of your income and expenses to ensure you're paying the correct amount of income tax.National Insurance Contributions (NICs)
National Insurance Contributions (NICs) are payments made by employees and employers to fund the UK's welfare system. As a self-employed individual or company director, you'll need to pay Class 2 and Class 4 NICs. The amount you pay will depend on your profits and income level.Employment Taxes
If you employ staff, you'll need to pay employment taxes, including employer's NICs and PAYE (Pay As You Earn) income tax. It's important to understand your obligations as an employer and seek advice from a tax professional if you're unsure.Capital Allowances
Capital allowances are a tax relief that allows businesses to deduct the cost of certain assets, such as machinery and equipment, from their profits. It's important to keep accurate records of your capital expenditure to ensure you're claiming the correct amount of capital allowances.Research and Development (R&D) Tax Relief
Research and Development (R&D) tax relief is available to businesses that are developing new products or processes. The relief allows businesses to claim back a portion of their R&D expenditure as a tax credit or deduction. It's important to seek advice from a tax professional to ensure you're eligible for R&D tax relief.Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS)
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are tax reliefs available to investors in eligible start-ups. The schemes offer tax breaks to encourage investment in new businesses.Should I Consider A Professional Tax Planning Service?
Tax planning accountants can save you time and provide valuable expertise on tax laws and regulations in the UK. They can help you identify tax benefits, ensure compliance, and provide peace of mind regarding your tax planning strategies. Our tax planning service at At MJ Kane & Co Accountants can help individuals and businesses in the UK minimise their tax liability legally. Our team of tax professionals will work with you to analyse your financial situation and identify the best tax planning strategies for your needs. We can help you take advantage of various tax reliefs, allowances, and exemptions provided by the government to reduce your tax bill significantly. With our tax planning service, you can keep more of your hard-earned money and achieve your financial goals. Learn more about our Business tax planning service. Starting a new business is an exciting but challenging journey, and it's important to understand the UK tax system and how to legally minimise your tax liability. By choosing the right business structure, registering for taxes, and taking advantage of available tax reliefs, you can ensure you're compliant with UK tax laws and making the most of your business's potential.Tax Planning FAQs
What is the current rate of corporation tax in the UK?
The current rate of corporation tax in the UK is 19%.What taxes will I need to register for as a new business owner?
As a new business owner, you'll typically need to register for VAT, corporation tax, and self-assessment.What is R&D tax relief?
R&D tax relief is a tax relief that allows businesses to claim back a portion of their R&D expenditure as a tax credit or deduction.What are SEIS and EIS?
SEIS and EIS are tax reliefs available to investors in eligible start-ups. The schemes offer tax breaks to encourage investment in new businesses.Related Blogs For Tax Planning
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