A complete guide to tax for small businesses

A complete small business tax guide – one of the most important resources you can bookmark. Make sure you take a look at our Self Assessment and tax resource page too, for all the details on small business tax, in one place.

Small business tax can be complicated, especially when you’re trying to do the right thing and note down all the taxes that apply to your business, and their deadlines.

• 7 self-employed tax changes you need to know about for 2019
• The guide to filling in and filing your Self Assessment tax return
• Set up your personal tax account: what the self-employed should know about HMRC’s service
• How much business insurance do I need?

Here’s a list of the main taxes that small businesses need to pay, along with pointers for more in-depth information, deadlines and where to find official guidance.

The specific taxes that apply to your business will depend on its structure, the products and services it offers and its performance.

Income tax

What it says on the tin, this is a tax you pay on your income. Not all sources of income are taxable, but you’ll pay income tax on things like:

• employment earnings
• self-employed profits, including from services you sell through websites or apps
• some state benefits
• most pensions
• rental income (unless you’re a live-in landlord and earn less than the rent-a-room limit)
• benefits from your job
• income from a trust
• interest on savings (if this exceeds your savings allowance)

There's a certain amount of income tax relief available, and you won’t have to pay any on the first £1,000 of your self-employed income (this is known as your ‘trading allowance’). Check gov.uk’s income tax page for more allowances and reliefs.

How do I pay?

Usually through Self Assessment. You’ll do this by filling in a tax return every year.

Top tip: Check our popular tax deductible expenses guide to make sure you're up to date with the expenses you can claim for at Self Assessment.

What’s the deadline?

You’ll be paying income tax through Self Assessment, so these are the deadlines you need to note:

• 31 January for online tax returns
• 31 October for paper tax returns

Remember, you’re filing your tax return for the previous tax year, not the one you’re currently in. Every tax year runs from 6 April to 5 April.

• 31 July for your second payment on account, if this applies to you

Help and guidance

Start with our guide to income tax. If you still need help, there’s also an income tax general enquiries hub, which should get you sorted, and a tax help page on gov.uk for pointers on hiring an accountant or applying for free professional advice.

Corporation tax

You’ll need to pay this tax on profits from doing business as:

• a limited company
• any foreign company with a UK branch or office
• a club, co-operative or other unincorporated association

You won’t get a bill for this tax, so it’s up to you to remember, work out and pay it. The best place to start is by registering, using gov.uk.

How do I pay?

Once you’ve registered, head to gov.uk’s pay your corporation tax bill page. There’s lots of information here, and it will direct you to the Government Gateway log-in page, where you’ll make the payment.

What’s the deadline?

The filing deadline for filing your company tax return is 12 months after the end of your accounting period.

There’s a separate deadline for payment, which is nine months and one day after the end of your accounting period. Your accounting period is usually your financial year, but you may have two accounting periods in the year you set up your company.

Help and guidance

Head to gov.uk’s hub page to get started. Because there’s no bill, deadlines and keeping on track can be tricky, so do read though the guidance on appointing an accountant, or call the helpline.

VAT

If your business sells products and services, you may need to start charging your customers VAT (which stands for value added tax). You’ll then pay any VAT due to HMRC and submit VAT returns.

The standard VAT rate is 20 per cent, although some products and services will have reduced or even zero rates, or be exempt.

You can register your business for VAT at any time, but if your turnover is above £85,000 (and it’s VAT-taxable), you must register without delay.

How do I pay?

All payments will need to be made electronically, and you can’t usually pay by cheque. You’ll need to make sure your payment reaches HMRC on time, to avoid a surcharge, so use gov.uk’s calculator to work out your timeline.

When you’re ready to pay, use the VAT payment page to get started.

What’s the deadline?

In most cases, the deadline for submitting your return and making the payment are the same – one calendar month and seven days after the end of an accounting period.

Your deadline will be shown on your VAT return (there are different deadlines if you use the Annual Accounting Scheme or payments on account).

You’ll find your VAT return in your VAT online account.

Help and guidance

Try gov.uk’s VAT index for guidance on a range of VAT topics, from charging and correcting errors to paying and reclaiming.

For specific questions, gov.uk run a VAT general enquiries page, or you can use the guidance specifically for VAT online services.

Employers’ PAYE

If you’re an employer, you’ll need to be aware and up to date with this payment. Your PAYE bill can include:

• employee income tax deductions
• class 1 and 1B National Insurance (you pay your Class 1A National Insurance bill separately)
• student loan repayments
• Construction Industry Scheme (CIS) deductions
• Apprenticeship Levy payments

How do I pay?

Use gov.uk’s payment page to get started with your bill. They’ve included a handy timeline for how you’ll need to make your payment, depending on how close to the deadline you are.

What’s the deadline?

You must pay your bill by:

• the 22nd of the next tax month if you pay monthly
• the 22nd after the end of the next quarter if you pay quarterly (e.g 22 July for the 6 April to 5 July quarter)

Help and guidance

Check you’re all set up for PAYE with gov.uk using their PAYE and payroll hub. You can also use the page to get started with your payment, and there’s the Employers: general enquiries page for any questions or concerns.

Your National Insurance

You pay National Insurance contributions (NICs) to qualify for certain government benefits, and the State Pension. Your National Insurance responsibilities depend on the type of business you’re running, and whether you employ anybody.

If you’re a limited company director, you may also be your own employee and need to make Class 1 NICs through your PAYE payroll. Or, if you’re a sole trader, you’ll pay Class 2 and Class 4 NICs.

If you have employees, you’ll need to pay NICs when you pay salaries, see Employers’ PAYE above for more details.

How do I pay?

Limited company directors will make NIC Class 1 payments through their own PAYE payroll. Sole traders making Class 2 and Class 4 NICs will usually do this through Self Assessment.

What’s the deadline?

This depends on your company structure. Sole traders will make their NICs through Self Assessment every year, so the 31 January deadline applies.

For limited companies, you’ll need to keep up to date with your PAYE arrangements, ensuring that NICs are factored into this.

Help and guidance

Start with gov.uk’s National Insurance hub page for general information, and head to National Insurance general enquiries page for queries and problem solving.

Business rates

If you’re using a non-domestic property for your business – such as a shop, office, pub, warehouse, factory or holiday rental/guest house – you’ll probably need to pay business rates.

You’ll also need to factor this in if you’re using a building (or part of it) for non-domestic purposes. Use gov.uk’s table to get ahead and estimate your bill.

Scottish and Northern Irish business rates are handled differently, so let us know in the comments if you’d like information on these.

How do I pay?

You’ll receive a bill from your local council in February or March each year. This will be for the upcoming tax year.

What’s the deadline?

The deadline will depend on your individual council, and will show on your bill.

Help and guidance

Go to gov.uk for their business rates hub page and the help page for queries. Contact your local council for questions about your bill, or the Valuation Office Agency (VOA) if your bill doesn’t look right.