Business Taxes 101: How Much Should You REALLY Be Paying? in Forest Hill
Understanding business taxes is crucial for entrepreneurs in Forest Hill. Paying too much in taxes can drain your profits, while underpaying can lead to penalties. So, how much should you really be paying in business taxes? Let’s break it down.
1. Corporation Tax
If you run a limited company, you must pay Corporation Tax on your profits. As of April 2023:
- Profits under £50,000 – Taxed at 19%
- Profits over £250,000 – Taxed at 25%
- Profits between £50,000 – £250,000 – A tapered rate applies
Tip: Claim allowable expenses and tax reliefs to reduce your taxable profit.
2. VAT (Value Added Tax)
If your business has a turnover exceeding £90,000 (as of 2024), you must register for VAT and charge customers 20% VAT (standard rate). Other rates include:
- 5% VAT (e.g., some energy bills, children’s car seats)
- 0% VAT (e.g., most food, children’s clothes)
Tip: If your business has low VATable expenses, consider the Flat Rate VAT Scheme to simplify payments.
3. Income Tax & National Insurance (For Sole Traders & Directors)
If you operate as a sole trader or receive a salary from your company, you’ll pay Income Tax based on earnings:
- Up to £12,570 – 0% (Personal Allowance)
- £12,571 – £50,270 – 20% (Basic Rate)
- £50,271 – £125,140 – 40% (Higher Rate)
- Over £125,140 – 45% (Additional Rate)
National Insurance (NI) applies based on earnings and business structure:
- Sole traders pay Class 2 & Class 4 NI
- Company directors pay Class 1 NI on salaries
Tip: Take dividends from your company (taxed at 8.75%, 33.75%, or 39.35%) instead of a higher salary to reduce tax liability.
4. Business Rates
If you operate from commercial premises in Forest Hill, you may need to pay Business Rates, based on your property’s rateable value.
Tip: Small businesses may qualify for Business Rate Relief (if your property’s value is below £15,000).
5. Employer Taxes (PAYE & NI Contributions)
If you have employees, you must:
- Deduct Income Tax & National Insurance (NI) from wages
- Pay Employer’s NI (13.8%) for salaries above £9,100/year
- Make workplace pension contributions under auto-enrolment
Tip: Use HMRC’s Employment Allowance to reduce Employer’s NI contributions (if eligible).
6. Capital Gains Tax (CGT)
If you sell business assets, such as property, shares, or equipment, you may be liable for CGT:
- 10% tax (Basic Rate taxpayers)
- 20% tax (Higher Rate taxpayers)
Tip: Use Business Asset Disposal Relief to reduce CGT to 10% when selling a business.
Final Thoughts
The amount of tax you pay depends on your business structure, income, and expenses. Efficient tax planning can help you minimize liabilities while staying compliant with HMRC.
Need Help Managing Your Business Taxes? At Eclat Accountancy Ltd., we help businesses in Forest Hill reduce tax burdens and optimise their financial strategy. Contact us today for expert guidance!
📞 0208 291 7713
🌐 www.eclataccountancy.co.uk
