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Tax basics for your start-up

6th September 2021

Believe it or not, the ‘taxman’ (or woman!) is your friend. 

No, it’s true. 

If you’ve ever been on the HMRC website, all the information about self-assessment, national insurance, how to set up an account, tax rates, VAT, PAYE and benefits is available for anyone setting up or running a business. There’s also a lot of it and to some, it may feel overwhelming. So here is a quick overview guide to tax for your start-up business.

HM Revenue and Customs (HMRC)

One of the very first things any new business must do by law is inform HMRC within three months of starting a business. You can register online to set up your account and receive your Unique Taxpayer Reference (UTR). This number is assigned to you by HMRC so your tax records can be filed and tracked. Be patient though, it would normally take up to 10 working days for you to receive your UTR and with the events of the last year, it could take longer.  

If you are setting up as a limited company, you will have to register for Corporation Tax. Tax returns must be done annually and there are certain dates and deadlines for filing your accounts throughout the year.

National Insurance

There are five National Insurance classes and three refer to self-employment. So, if you are self-employed, for 2021/2022, if you earn more than £6,515 in profits, you’ll be liable for Class 2 National Insurance contributions (NIC). Class 4 is for those who are earning profits of £9,569 or more a year.

Value Added Tax

Value Added Tax, or VAT, is a tax placed on goods or services people buy. Currently it is charged at 20%. If your taxable turnover (not profit) is more than £85,000 you must register for VAT. If your business collects and pays VAT, you can claim what has been paid.

Tax rates and expenses

Your personal allowance is the amount of money you earn tax-free. From 6th April 2021 to 5th April 2022, this is £12,570, but is lower if you earn over £100,000 and higher if you claim Marriage Allowance or Blind Person’s Allowance. After your allowance there are different levels of rates that your income is taxed on. If you are the director of a limited company, there are other rules and tax allowances to consider too. This is where getting professional assistance is so important. 

There are so many things that you can claim for expenses, and the list is too long for this blog. A general rule for what you can claim though, is to consider everything you use (be that services or physical items for example) for your business and how much that costs. Some you will be able to claim in full, such as stationery, some you can claim in increments, such as cars and big-ticket items.

If you want to learn more about tax and see a full list of the accounts calendar, download my book, The New Business Kit today.


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