By Victoria Russell
As a small business owner in the UK, staying on top of your tax responsibilities is crucial. With 2025 fast approaching, it’s essential to be aware of the taxes your business needs to pay and when. This guide will break down the key taxes for small businesses in 2025, so you can keep your business compliant and avoid any penalties.
Key Taxes for Small Businesses in the UK
1. Corporation Tax
Corporation tax is paid by limited companies on their profits. In 2025, the corporation tax rate remains at 25%. You are responsible for calculating how much tax your business owes and paying it to HMRC. This tax is due nine months after the end of your company’s financial year. Proper planning and keeping up-to-date records will help you meet this deadline and avoid any interest or fines.
2. Value Added Tax (VAT)
VAT is charged at 20% on most products and services in the UK. If your business’s turnover exceeds £90,000 over a 12-month period, you must register for VAT. If your turnover is below this threshold, you can still register voluntarily if it benefits your business, such as when you want to reclaim VAT on expenses. Once registered, you’ll need to file regular VAT returns and make payments to HMRC.
3. National Insurance Contributions (NICs)
National Insurance Contributions are a key part of your tax obligations. As an employer, you’ll need to pay NICs for your employees, and if you’re self-employed, you’ll be required to pay NICs based on your profits. The rates you pay will vary depending on how much you or your employees earn, so understanding your responsibilities is crucial to staying compliant.
4. Income Tax
If you’re a sole trader, you’ll pay income tax on any profits over the personal allowance of £12,570. Directors of limited companies pay income tax on their salaries or dividends. Most income tax is collected through PAYE for employees, but self-employed individuals will need to submit a self-assessment tax return. Keeping accurate records of your earnings throughout the year will make it easier to submit your return and pay the correct amount of tax.
5. Business Rates
Business rates are similar to council tax but for commercial properties. If you run your business from a dedicated premises, you’ll likely need to pay business rates. However, if you operate from home without having customers or stock on the premises, you might not be liable for business rates. Always check with your local council to confirm whether this applies to your business.
The Importance of Tracking Business Expenses
Tracking your business expenses is an essential part of managing your finances and ensuring you’re paying the right amount of tax. Keeping accurate records will help you claim deductions, manage cash flow, and understand where your money is going.
What Counts as a Business Expense?
Business expenses include anything that is necessary for running your business. This could be office supplies, travel costs, marketing expenses, or software subscriptions. By recording these costs, you can reduce your taxable income, lowering the amount of tax you owe.
How to Track Expenses Effectively
Setting up a separate business account is one of the easiest ways to track your expenses. It allows you to keep your personal and business transactions separate, which will simplify things come tax season. Using accounting software can also help automate the process by syncing your bank accounts and keeping a digital record of all your expenses.
FAQ About Tax Requirements for Small Businesses in the UK
1. Do I have to register for VAT if my turnover is under £90,000?
No, but you can register voluntarily if it benefits your business. Some businesses choose to register so they can reclaim VAT on expenses.
2. When is corporation tax due?
Corporation tax is due nine months after the end of your company’s financial year. Make sure you stay on top of your deadlines to avoid any penalties.
3. What happens if I don’t pay my taxes on time?
If you miss a tax payment deadline, HMRC may charge you interest and penalties. It’s important to plan ahead and make sure you have enough set aside to pay your tax bill on time.
4. What business expenses can I claim?
You can claim any expenses that are “wholly and exclusively” for business purposes. This includes things like travel, office supplies, and marketing costs.
5. What are the National Insurance rates for self-employed individuals?
Self-employed individuals pay Class 2 and Class 4 NICs based on their profits. Make sure to keep track of your earnings so you know what you owe.
FAQs About VJR Business Support
1. What services does VJR Business Support provide?
VJR Business Support offers bookkeeping and virtual assistance services to help small businesses stay on top of their finances and day-to-day operations.
2. Can VJR Business Support help with tax preparation?
Yes, VJR Business Support can assist with bookkeeping and ensuring your financial records are accurate, which will make tax filing much easier.
3. How can I get in touch with VJR Business Support?
You can visit our website or contact us directly to learn more about how we can support your business.
By understanding your tax responsibilities and keeping track of your expenses, you’ll be well-prepared to manage your business’s taxes in 2025. Taking the time to stay organised now will save you stress and money when it’s time to file.
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