Any dealing with business is a dealing with the law. There is such a thing as business law, after all! When it comes to business and legalities, it usually has much more to do with tax than anything else.
It’s absolutely crucial that you take all of this into account. A startup is simply going to be at so much risk if you’re not dealing with business tax as soon as possible. You should get to know the different types of tax you’re going to deal with during your entrepreneurial pursuits.
But I hate tax and don’t want to deal with it!
Well, that’s understandable. I don’t much like tax either. But you know that if you don’t do this properly you can go to prison, right? If you’ve made it this far into the article, then you know you need to deal with business tax. So you can hardly tell the judge that you didn’t know you had to deal with it!
If you really don’t have the time to get your head around these things at the moment, then look into getting some help. Don’t just ignore business tax and assume that it won’t become a problem. In fact, even if you do want to understand this tax a bit more thoroughly? I’d still think about getting some help with it all. This is why so many businesses have professional accountants, after all. In fact, the right accountancy practices can help you save money on the whole thing.
Corporate income tax
There’s personal income tax and then there’s corporate income tax. The rates are different. As many businesses are going to make profits from a wide number of areas, the tax office is going to look at it differently. The general corporation tax rate seems to have remained at a steady 20% in the United Kingdom.
The type of work that you do might affect what sort of tax rate you’re going to be looking at. A lot of fields that used to be in public ownership will certainly see different corporate income tax rates. Gas companies, for example, will often be taxed more on their profits. Life insurance companies will also be taxed using a “special” corporation tax. It’s highly recommended that you read more on the subject.
I’m assuming that, at some point, you’ve been an employee. (Unless you managed to jump straight into the seat of “employer” in your first job. Which is pretty impressive, I must admit.) You may have seen the term PAYE thrown about, perhaps by financial controllers or on your payslip.
PAYE refers to “pay-as-you-earn tax”. It’s the system that HM Revenue and Customs have in place to tax employers via their payrolls. When you pay employees, you need to have this system in place. The income you pay your employees needs to be taxed too, after all. However, there are some exceptions. Example: if your employees aren’t paid more than £112 a week, then you don’t need to bother with PAYE at all. Whatever you do, you must keep payroll records. HMRC may need to use these in the future for tax purposes!