How To Pay Taxes In The UK

Acquiring knowledge about taxes in the UK is essential for anyone wishing to set up a business in this country.

The UK tax system is characterised by being clear and organised, which helps with its understanding and compliance.

This article outlines the main tax obligations in the UK related to businesses in the UK.

Where To Pay Taxes In The UK
Main Taxes In The UK
Conclusion

1 Where To Pay Taxes In The UK

The authority responsible for collecting taxes in the UK is HM Revenue & Customs (HMRC).

Its website is user-friendly and facilitates tax compliance for UK companies, such as submitting the necessary returns.

In addition, it allows you to pay taxes in various ways, including by debit or credit card, bank transfer or direct debit from your bank account.

2 Main Taxes In The UK

In the United Kingdom, the government’s financial year runs from 6 April to 5 April of the following year. This impacts personal taxes and certain aspects of company accounting.

However, the financial year of companies generally does not allign with the official one. This is because the accounting period of a company established in the UK starts from the day it is created and lasts for twelve months.

Please, bear in mind that although the information provided here is reliable, it is no substitute for personalised advice from a tax expert.

Corporation Tax

Companies in the United Kingdom pay this tax by applying a percentage ranging from 19% to 25% to their profits over a 12-month period. As a result, they determine the total amount of tax owed.

The Company Tax Return must be filed with HMR. And you have to pay the tax within 9 months after the end of the accounting period.

VAT

Businesses collect Value Added Tax on behalf of the government by charging it at each stage of production and distribution. Ultimately, the final consumer bears the cost.

For this reason, invoices itemise the taxable base, which is the price of the goods or services, and the VAT.

The registration and declaration of this tax is mandatory for all businesses in the UK with an annual turnover exceeding £90,000.

PAYE and National Insurance Contributions

Through the PAYE (Pay As You Earn) system, companies withhold income tax from employees’ payslips each month and pay it to HMRC.

Meanwhile, National Insurance Contributions (NICs) are social security contributions that the company also pays monthly through HMRC.

Business Rates

A company in the UK will pay this tax on the commercial premises it uses for the development of its activity.

Dividend Tax

The shareholders of a company pay this tax on the money they receive from the distribution of company profits. It is paid through the Self-Assessment Tax Return.

The first £1,000 is exempt from taxation, but from this amount onwards a percentage is established in brackets.

Capital Gains Tax

It taxes profits obtained from the sale of assets, such as real estate or shares.

Taxes for profits in the Basic Rate Tax Band are 10% and those above it are 20%. It is declared through the Self-Assessment Tax Return.

Other Taxes In The UK

In addition to those listed, a company in the UK pays other taxes.

Some of these are Environmental Taxes, for companies that consume a lot of energy, or Insurance Premium Tax, which is applied to business insurance.

Conclusion

UK taxes have specific rules for calculating them that must be scrupulously respected.

On the other hand, having proper financial planning in place helps companies to avoid penalties for non-compliance.

Finally, we can say that UK taxes are clear and the way to declare them is easy. However, it is always best to have an expert accountant, especially at the beginning.