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For a successful business, you need a viable business idea, the skills to make it work and the funding. Discover whether your idea has what it takes.
Forming your business correctly is essential to ensure you are protected and you comply with the rules. Learn how to set up your business.
Advice on protecting your wellbeing, self-confidence and mental health from the pressures of starting and running a business.
Learn why business planning is an essential exercise if your business is to start and grow successfully, attract funding or target new markets.
It is likely you will need funding to start your business unless you have your own money. Discover some of the main sources of start up funding.
Businesses and individuals must account for and pay various taxes. Understand your tax obligations and how to file, account and pay any taxes you owe.
Businesses are required to comply with a wide range of business laws. We introduce the main rules and regulations you must comply with.
Marketing matters. It drives sales and helps promote your brand and products. Discover how to market your business and reach your target customers.
Some businesses need a high street location whilst others can be run from home. Understand the key factors from cost to location, size to security.
Your employees can your biggest asset. They can also be your biggest challenge. We explain how to recruitment and manage staff successfully.
It is likely your business could not function without some form of IT. Learn how to specify, buy, maintain and secure your business IT.
Few businesses manage the leap from start up to high-growth business. Learn what it takes to scale up and take your business to the next level.
While it's unrealistic to expect any small-business owner to have an in-depth knowledge of tax and National Insurance rules, here are some key facts you should know before you start up
Self-employed people pay tax on their business profits (not their earnings). After filing a self-assessment tax return - which must be completed every year - tax is payable on profits generated during the preceding 12-month accounting period.
Class 2 National Insurance contributions (NICs) must also be paid. This amounts to a flat-rate of £2.95 for 2018/19 (£2.85 for 2017/18) per week, which is now collected via self-assessment. The plan to abolish Class 2 NICs has been delayed to April 2019.
Class 4 NICs must be paid and these are linked to profits (the lower profit limit is £8,424, the upper limit is £46,350 in 2018/19). Class 4 NICs are paid at the same time as your self-assessment tax bill.
After they set up a limited company, as well as a director, people become an employee of their company who pays income tax (as any other staff member) through a scheme called PAYE (pay as you earn). The salaries of company directors are usually enhanced with dividends, which can provide a tax advantage. No tax is payable on the first £2,000 of dividend income. Income over the dividend allowance is taxed at 7.5% for basic rate tax payers, 32.5% for higher rate tax payers and 38.1% for additional rate payers. This allowance has reduced significantly (previously £5,000 tax free since April 2016). Tax and NICs are deducted via the company's payroll, which the employer must set up. The company must also pay employer's NICs for its staff.
The level of income tax for employees is decided by pre-tax income band. The basic rate of income tax (20%) is payable on wages of up to £34,500, after for 2018/19 which 40% is payable (at £150,000 the rate increases). All employees qualify for different forms of tax allowance, including a personal allowance of £11,850 for 2018/19.
Corporation tax of 19% must be paid yearly on company profits (the small profits and main rates of corporation tax were aligned in April 2015). You (or your accountant) must work out how much Corporation Tax is due and pay the money to HM Revenue & Customs (HMRC), usually within nine months of company year-end.
If you've told HMRC you've started your business, you can claim most expenses incurred as pre-trading costs (exceptions include money spent forming a limited company).
There are strict rules about allowances, reliefs and legitimate business expenses. If you're self-employed, visit the HMRC website. The most common allowable expenses include: stock/materials, wages, premises costs, vehicle and travel, finance, administration, and professional fees.
When working out your tax bill, you can claim capital allowances on: plant and machinery (including vehicles, computers, equipment, tools, etc), fixtures and fittings for your premises, and certain types of building. The allowance is calculated as a fixed percentage of an item's value and is taken off that item's value each year. Capital allowances vary from a few per cent to 100%.
You can also claim the cost of using your own vehicle for business as an expense, either costed as a fixed mileage rate or actual expense. You can deduct from your taxable profits a proportion of some of your domestic overheads if you run your business from home. A word of caution: if you run a limited company and claim for vehicle use, it is classed as receiving a 'benefit in kind' for which income tax is payable, while the company incurs additional National Insurance.
If you're self-employed (ie a sole trader) and your business fails to make a profit, you can get tax relief by setting the loss against: other income from the same or previous year, business profit in subsequent years, or in the previous three years if your business ceases trading.
VAT is a transaction tax levied on sale of most goods and services. The standard rate is 20%. If your VATable turnover exceeds the threshold (£85,000 per annum) you must become VAT-registered. Even if your turnover is lower, becoming VAT-registered can sometimes be financially beneficial for your business, providing your customers are VAT-registered (otherwise they'll simply have to pay more).
All businesses pay VAT on most purchases ('input tax'), while registered businesses charge VAT on their goods and services ('output tax'). VAT-registered businesses pay HMRC the difference between the output tax charged and input tax paid.
The above provides a brief introduction to the likely tax and National insurance. There's no substitute for professional advice from an accountant tailored to your specific circumstances.