Originally written by Emma Twynholm on Small Business
It is easy to forget that even if you are a director of your business, you are considered an employee as well. Directors, just as the staff they employ, could be subject to any of the taxes mentioned in this article.
However, as a director it is often possible to structure your income from the business so that you don’t pay PAYE or National Insurance contributions (NIC) on salary and instead pay tax on dividends, which starts at a more favourable tax rate of 7.5 per cent compared to 20 per cent for salary.
For the people you employ you would need to be aware of the following taxes that will potentially apply.
National Insurance
The main tax that you need to be aware of when employing someone is National Insurance. Businesses are required to pay Class 1 employer’s NIC on any employee’s earnings over £737 a month. Employer’s NIC is charged at a rate of 13.8 per cent. If the staff member is under 21, the business pays no Class 1 NIC on earnings below £4,189 a month and 13.8 per cent above this threshold.
National Insurance is extended to Class 1A and Class 1B. Class 1A
Tag Archive for Tax & Vat
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What taxes does a business pay when employing staff?
by Emma Twynholm • • 0 Comments
Originally written by Emma Twynholm on Small Business
It is easy to forget that even if you are a director of your business, you are considered an employee as well. Directors, just as the staff they employ, could be subject to any of the taxes mentioned in this article.
However, as a director it is often possible to structure your income from the business so that you don’t pay PAYE or National Insurance contributions (NIC) on salary and instead pay tax on dividends, which starts at a more favourable tax rate of 7.5 per cent compared to 20 per cent for salary.
For the people you employ you would need to be aware of the following taxes that will potentially apply.
National Insurance
The main tax that you need to be aware of when employing someone is National Insurance. Businesses are required to pay Class 1 employer’s NIC on any employee’s earnings over £737 a month. Employer’s NIC is charged at a rate of 13.8 per cent. If the staff member is under 21, the business pays no Class 1 NIC on earnings below £4,189 a month and 13.8 per cent above this threshold.
National Insurance is extended to Class 1A and Class 1B. Class 1A
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What taxes does a business have to pay on its trading activities?
by Joanne McLaughlin • • 0 Comments
Originally written by Joanne McLaughlin on Small Business
Companies and self-employed individuals in the UK have a number of obligations in relation to the taxes they may have to pay to HMRC.
It can be overwhelming as to which of these obligations apply to you, given that different taxes are due depending on your circumstances. This can be especially unsettling when you are just starting out in business. This article provides an overview of the main business taxes you will encounter and the circumstances under which you will be liable to pay these.
Corporation Tax
All limited companies in the UK are liable to corporation tax on profits. The profit of the company is, broadly, calculated by deducting items of allowable business expenditure from your turnover figure. Note that there are certain reliefs on corporation tax that may also be deductible.
Corporation tax returns must be filed no later than twelve months after the end of your accounting period, although the tax must be paid within nine months and one day of the account period end.
The current UK corporation tax rate is 19 per cent, although it has been confirmed that this will increase to 25 per cent with effect from April 1 2023.
Income Tax
If
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Which products have VAT on them?
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
It’s vital for your business that you know which products and services are subject to VAT and at what rate.
There are five categories of product or service for VAT. The majority of goods and services are Standard rated (subject to VAT at the standard rate, currently 17.5 per cent), some are ‘Exempt’, some are or ‘Zero-rated’ and some are at a ‘Reduced Rate’ (currently five per cent). Others are outwith the scope of VAT, which we’ll talk about in a minute.
These rates may only apply if certain conditions are met or in particular circumstances, depending on some or all of the following factors.
Who’s providing or buying them
Where they’re provided
How they’re presented for sale
The precise nature of the goods or services
Whether you obtain the necessary evidence
Whether you keep the right records
Whether they’re provided with other goods and services
Other conditions might also apply.
>See also: 7 tax myths for small business owner/managers exploded
Food and drink for human consumption is normally zero-rated, with the exception of catering, alcoholic drinks, confectionary, crisps and savoury snacks, sports drinks, hot food, hot takeaways, ice cream, soft drinks and mineral water.
Restaurants must always charge VAT on everything eaten either on their premises
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Which products have VAT on them?
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
It’s vital for your business that you know which products and services are subject to VAT and at what rate.
There are five categories of product or service for VAT. The majority of goods and services are Standard rated (subject to VAT at the standard rate, currently 17.5 per cent), some are ‘Exempt’, some are or ‘Zero-rated’ and some are at a ‘Reduced Rate’ (currently five per cent). Others are outwith the scope of VAT, which we’ll talk about in a minute.
These rates may only apply if certain conditions are met or in particular circumstances, depending on some or all of the following factors.
Who’s providing or buying them
Where they’re provided
How they’re presented for sale
The precise nature of the goods or services
Whether you obtain the necessary evidence
Whether you keep the right records
Whether they’re provided with other goods and services
Other conditions might also apply.
>See also: 7 tax myths for small business owner/managers exploded
Food and drink for human consumption is normally zero-rated, with the exception of catering, alcoholic drinks, confectionary, crisps and savoury snacks, sports drinks, hot food, hot takeaways, ice cream, soft drinks and mineral water.
Restaurants must always charge VAT on everything eaten either on their premises
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Banking giant suggests 5% working from home tax for businesses
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
A 5 per cent ‘working from home’ tax should be imposed, according to a new report from Deutsche Bank.
The tax itself would be paid by the employer if the employer does not provide a worker with a permanent desk. If it does, and the staff member chooses to work from home, the employee would pay the tax out of their salary for each day they work from home. For someone on a £35,000 salary, it works out at around £7 a day.
Deutsche Bank’s report says that the income from this tax would be paid to people who can’t do their jobs from home. The banking giant points out that since those working from home, these employees are saving money and taking less risk by not going to work, so a tax would help to redress the balance.
It calculates that the tax would generate an income of £6.9bn a year in the UK. This in turn could pay out grants of £2,000 to low-income workers and those who are under threat of redundancy.
The report is part of the bank’s ‘Konzept’, an ongoing project to spark debate around important topics.
“For years we have needed a
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Business body calls to extend tax-free shopping to EU visitors after Brexit
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
Retailers in the West End of London want to extend tax-free shopping to EU shoppers after Brexit.
This will help them to get through the slump in sales following a slow recovery from the coronavirus lockdown. Footfall on London’s main shopping streets is down on pre-COVID 19 levels. It rose 12.7 per cent in the week to August 22nd, but this is still down 62 per cent on this time last year. Meanwhile, footfall is down 50 per cent in other regional cities and 30 per cent in outer London, according to Springboard.
A good chunk of this shortfall has been attributed to a lack of international tourists. New West End Company says that it relies on these visitors for over half of its £10bn annual revenue.
The organisation’s chairman, Peter Rogers, is calling for tax-free shopping to be extended to EU visitors once the Brexit transition period ends in December. His letter has signatures from over 70 executives including retail groups like Harrods and H&M.
>See also: How to cope with the slow return to trade post-lockdown
Why would extending tax-free shopping help businesses?
Statistics from NWEC, international tourists spend over £6bn, over half of which is tax-free.
Hot Business News Today
Business body calls to extend tax-free shopping to EU visitors after Brexit
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
Retailers in the West End of London want to extend tax-free shopping to EU shoppers after Brexit.
This will help them to get through the slump in sales following a slow recovery from the coronavirus lockdown. Footfall on London’s main shopping streets is down on pre-COVID 19 levels. It rose 12.7 per cent in the week to August 22nd, but this is still down 62 per cent on this time last year. Meanwhile, footfall is down 50 per cent in other regional cities and 30 per cent in outer London, according to Springboard.
A good chunk of this shortfall has been attributed to a lack of international tourists. New West End Company says that it relies on these visitors for over half of its £10bn annual revenue.
The organisation’s chairman, Peter Rogers, is calling for tax-free shopping to be extended to EU visitors once the Brexit transition period ends in December. His letter has signatures from over 70 executives including retail groups like Harrods and H&M.
>See also: How to cope with the slow return to trade post-lockdown
Why would extending tax-free shopping help businesses?
Statistics from NWEC, international tourists spend over £6bn, over half of which is tax-free.
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VAT on taxi fares, vehicles, fuel and staff travel – what can I claim?
by Ben Lobel • • 0 Comments
Originally written by Ben Lobel on Small Business
Small business owners often have a tough time navigating tax and what expenses they can claim VAT on.
Let’s start with Taxi fares. Zero rating of domestic passenger transport does not apply if the vehicle is designed to carry fewer than ten passengers.
Taxi and hire car fares are therefore, standard rated and if the business provider is registrable for VAT, it must charge VAT to customers.
Extra charges for baggage, waiting time, etc are also standard rated as are referral fees from other taxi businesses.
Tips and gratuities given voluntarily are not payment for supplies and are outside the scope of VAT. VAT due is calculated by multiplying the fares, including extras, by the VAT fraction.
Registered persons (such as a standard rated Taxi driver) must issue a VAT invoice to any customer who asks for one.
If the taxi is VAT registered they should issue you with a receipt which includes the VAT registration number, the date and the amount of the fare which will enable you to reclaim the VAT as Input VAT (the VAT added to the price when you purchase goods or services that are liable to VAT).
What else can small businesses claim VAT
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VAT on taxi fares, vehicles, fuel and staff travel – what can I claim?
by Ben Lobel • • 0 Comments
Originally written by Ben Lobel on Small Business
Small business owners often have a tough time navigating tax and what expenses they can claim VAT on.
Let’s start with Taxi fares. Zero rating of domestic passenger transport does not apply if the vehicle is designed to carry fewer than ten passengers.
Taxi and hire car fares are therefore, standard rated and if the business provider is registrable for VAT, it must charge VAT to customers.
Extra charges for baggage, waiting time, etc are also standard rated as are referral fees from other taxi businesses.
Tips and gratuities given voluntarily are not payment for supplies and are outside the scope of VAT. VAT due is calculated by multiplying the fares, including extras, by the VAT fraction.
Registered persons (such as a standard rated Taxi driver) must issue a VAT invoice to any customer who asks for one.
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If the taxi is VAT registered they should issue you with a receipt which includes the VAT registration number, the date and the amount of the fare which will enable you to reclaim the VAT as Input VAT (the VAT added to the price when you purchase goods or services