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Set Up a Successful Small Business: Tax for small businesses

by Vera Hughes and David Weller

Let your accountant handle your tax returns and all correspondence with HM Revenue and Customs; it will save you a great deal of time and, probably, money. The tax year runs from 6 April one year to 5 April the following year, irrespective of your company’s financial year. Your self-assessment returns must be in by 30 September if you want HM Revenue and Customs to calculate how much you owe. In any case your return must be in the following 31 January, or penalties will apply. Be honest with your accountant.

If your turnover is £68,000 or more (2009 figures) you must register for VAT and add your VAT registration number to your stationery. You can claim the VAT you have paid on genuine business purchases and must pay the VAT you have charged your customers.

The amount of income tax you have to pay depends on the profit your business makes in any one year. The rules about what is and is not allowed for tax purposes are complicated. For example, basic costs and running expenses are allowed, while capital outlay on the purchase of machinery, vehicles and equipment is not; business insurance premiums are allowable, but your own life insurance is not.

You will have to pay your personal National Insurance contributions, as well as NI for employees. You will have to pay personal income tax (a separate return) on your own income for the year.


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