Unexpected tax bills are the last thing you and your business need. As such, it is critical to the success of your business that you know precisely what to expect and when to expect it. With a little bit of help and preparation, you can do just that.
At Moulds & Co Accountants, to ensure that you’re fully prepared, we would always suggest seeking the advice of a professional tax advisor or qualified accountant who can provide the information and assistance you need to successfully save for your tax payable.
When is your tax due?
Firstly, business tax payments are based on your yearly trading profits and other chargeable gains made, plus any capital profits.
If you run your business through a company, corporation tax is payable 9 months and one day after your year-end date – it’s vital you know when your year-end date is as this is different to the standard accounting year.
Corporation tax due for the accounting year to 31 March 2018, will be due for payment 1 January 2019.
How much should I set aside?
To be on the safe side, targeting around 15% to 20% of your monthly profits and transferring this to a deposit account should help to partly cover this liability.
If you are self-employed, things are a little different. Your business profits will form part of your self-assessment tax return and the amount of tax you will need to pay is split into two instalments on account. A balancing adjustment may also be required.
Whereas setting aside money for corporation tax is fairly simple to estimate, reserving cash for self-assessment tax payments can be a little more tricky. A general idea of how to start budgeting would be to deduct £1,000 per month (the approximate amount of the personal allowance), for each business partner, from your trading profits and then set aside 20% of what remains.
It should be noted however that if you have taxable income outside of your business profits then you will need to take that into consideration too and may want to put extra aside.