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By miguel-ingles
- In Uncategorized
One of the main aspects that you should consider when creating a corporation is to comply with local fiscal rules. Not only with the objective of avoiding legal issues, but so our business correctly develops. In this article, I will explain how to pay your company’s taxes in the UK.
How to Register a Company
Before doing any business activity and, therefore, paying any taxes, it is necessary to register our Limited Company or Limited Liability Partnership both in the Companies House and in His Majesty’s Revenue and Customs (from now on, HMRC). You can complete these processes online.
However, if your company has the legal structure of Sole Trader or Partnership, you will not be required to sign it up in the Companies House nor the HMRC. Instead, each member will have to register individually in the National Insurance.
In this article, you will find more information about the different business structures.
How to Pay your Company's VAT in the UK
First, we must understand how VAT works in this country. The standard rate adds an extra 20% to the sale price of most products and services. Below it, the reduced rate (5%), which applies to anything related to energy or healthcare. Finally, some products such as food or books will be VAT-free.
To pay it, you must indicate both the VAT charged in sells and the amount the company has paid in its purchases. You must declare it every three months. This process can be done online via this link.
How to Pay your Company's Corporation Tax in the UK
As in the case of VAT, Corporation Tax applies different rates. If your company has earned profits over 250 000 GBP during the current financial period, you shall pay a 25% of those. However, in case benefits were lower than 50 000 GBP, you must pay a 19%. If the total amount is between both margins, you shall calculate the corresponding percentage. You can do it in this webpage.
To pay this tax, you may hand over form CT600 alongside annual accounts to HMRC.
Every limited liability business, like Limited Companies or Limited Liability Partnership, must pay Corporation Tax. On the other side, Sole Traders and Partnerships are exempt of its payment.
How to Pay Income Tax in the UK
Citizen pay this tax depending on their personal income. The company will not have to pay this fee. It will be pay each year, during the corresponding fiscal year.
Again, there are different rates, which depend on your annual revenue. You can check these in this webpage.
How to Pay National Insurance Fees in the UK
These fees are used to cover National Health System, pensions and subsidies or other public systems expenses.
Employers must pay 13.8% of their employees’ income, in addition to their salaries. On the other hand, employees will pay a 12% if they are subjected to Income Tax’s basic rate, or 14% if they must pay the higher fee.
Other of your Company's Taxes in the UK
Product tariffs
Authorities apply these to certain products that come from outside the UK if the sum of their value is superior to 135 GBP. Some assets will be exempt from paying taxes while, in other cases, the applied percentage to these goods will depend on the country of origin.
Specific taxes to certain zones or economic sectors
We should keep in mind that, as in other countries, certain UK regions have more relaxed fiscal rules than others.
On the other hand, authorities will apply specific taxes to some products or economic sectors.
What to Do if you Cannot Pay your Company’s Taxes in the UK
In case you do not pay your taxes within the correspondent period, HMRC may fine you. They will apply a 5% penalty plus interests in case you do not pay the fees immediately.
However, it is unusual that courts prosecute somebody for tax evasion send someone to prison for this matter. Nevertheless, HMRC may seize your personal assets, garnish money from your bank accounts or declare your business as bankrupted.
Because of all the previous, in case you think you will not be able to pay taxes within the correspondent period, you should tell HMRC as soon as possible.