Pay the correct taxes – A simple guide for your Tax, Accounts & Records

Starting up your own business has got it’s challenges; especially knowing what taxes to pay. But we’re here to make your life easier. Here is a simple bullet point list on what taxes you need to pay for the type of business legal structure you choose. No complex jargon, just plain English.

I know there are many website out there that disclose what different taxes, account and records you need to complete, however what frustrated – was the lack of straight forward answers telling me what particular taxes I needed to pay as a private limited company. So below I have gathered all the relevant information from various website including businesslink.gov.uk and hmrc.gov.uk to provide our readers with the relevant information.

Private Companies

• Company directors must pay Income Tax and Class 1 National Insurance contributions (NIC’s) on earnings. These calculated on an annual cumulative basis.
• Regualr employees must pay Class 1 NIC’s, calculated on their monthly or weekly earnings separetely.
• Send an annual return to Companies House
• Must file its accounts annually with Companies House
• Must pay Corporation Tax
• You need to register for Self Assessment and complete a tax return to HMRC each year

Sole Trader

• Profits are taxed as Income Tax
• Class 2 National Insurance (fixed sum)
• You pay Class 4 NIC’s on any profits
• You need to register for Self Assessment and complete a tax return to HMRC each year

General Partnerships
Common features across partnerships:

• Each partner pays tax on their share of the profits an gains
• Each partner pays National Insurance contributions
• Each partner needs to register for Self Assessment and complete a tax return to HMRC each year
• A nominated partner must send HMRC a partnership return

Specific features for different partnerships:

• Ordinary partnerships have to be registered with HMRC for tax purposes.
• Limited partnerships must register with Companies House, but don’t generally have to make an annual return or file accounts.
• Limited partnerships must pay Corporation Tax
• Limited partnerships and limited liability partnerships: upon registring at Companies House, inform HMRC that the partnership has been set up. HMRC will set up the partnership’s tax records.
• Limited liability partnerships (LLP’s) must register with Companies House.
• LLP’s must send Companies House an annual return
• LLP’s must file accounts with Companies House

Public Companies (by the time you are a public company, you’ll most probably have your accountant to sort all this out for you)

• Company directors must pay Income Tax and Class 1 National Insurance contributions (NIC’s) on earnings. These calculated on an annual cumulative basis.
• Regualr employees must pay Class 1 NIC’s, calculated on their monthly or weekly earnings separetely.
• Send an annual return to Companies House
• Must file its accounts annually with Companies House
• Must pay Corporation Tax
• You need to register for Self Assessment and complete a tax return to HMRC each year
• PLC must also comply with HMRC’s requirements for PAYE for employers, VAT, the Construction Industry Scheme etc.

Regardless of your business legal structure, you’ll have to register for VAT if either:

• your turnover for the previous 12 months has gone over a specific limit – called the ‘VAT threshold’ (currently £77,000)
• you think your turnover will soon go over this limit

You can leave your comments below with your thoughts. Do you like this simple guide or would you prefer a more detailed guide? We’re always looking to improve the content we share with our readers helping you to run a more successful business. We’d love to hear from you!