Tax comes in many different forms and as a self-employed person or company owner there are 7 taxes which are critical to remember when dealing with any business accounts. So if you can can keep these in mind whenever doing any business and ensure to put money aside then you’ll be absolutely fine.
1. Income Tax
Simply put, this is the usual 20% tax that you will need to pay on ALL profitable income to your business. My advice here is whenever you gain some income, figure out how much of that is profit and put 20% of that profit into a separate bank account, ready for your tax return at the end of the year.
2. National Insurance Tax
This is the tax all UK workers pay towards state benefits such as healthcare, unemployment and pensions. As a self-employed person this used to be paid on a monthly basis direct to the HMRC, however the HMRC recently changed this and you now pay your National Insurance along with your self-assessment at the end of each year, so my advice is to put an extra £15 away each month into a separate bank account (along with all your other tax) to ensure you are covering your personal contributions at the end of the year.
3. Corporation Tax
This only applies to Limited Companies, and it’s basically the company version of ‘Income Tax’ which is the usual 20% on ALL profitable income to your company. So again, be sure to have a separate account where you put the 20% of all profit from your income.
4. Capital Gains Tax
This is the tax you pay on any profits you make from the sale of property or investment, so it won’t apply to everyone but if it does apply to you then be sure to check out what rates you’ll need to pay. They differ depending on exactly what the income is for but to be safe just check out – https://www.gov.uk/capital-gains-tax/overview
5. Value Added Tax (VAT)
VAT only applies to you if you are VAT Registered, but is quite simply the tax you pay on every product or service you supply and is generally 20% of everything. The difference between this and income/capital gains tax is that it’s not only on the profits of your income, VAT must be added to every product or service no matter what.
6. Stamp Duty Land Tax
This is the tax you will pay upon purchasing land or property over a certain price (As of writing this blog Feb 2016: £125,000 for residential properties and £150,000 for non-residential land/properties.) so again doesn’t apply to everyone but VERY important to bear in mind if you are looking to purchase property or land.
7. Inheritance Tax
As the name suggest, this is the tax you pay on when inheriting money from anyone’s estate (property, money and possessions). It’s not a nice thought but even in death ‘they’ still get you with tax so it’s very important to remember when sorting wills and estates for inheritance.
And they ladies and gents are the 7 deadly taxes you must remember when dealing with any form of income in the UK.
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