What taxes are payable in my Limited Company?

When you operate a limited company there are certain requirements that you need to ensure you are aware of - one of these is the various taxes that you may be levied, or charged during the year.  Some of these taxes are compulsory, some are optional depending on your business.

Corporation tax:  this tax is paid by all UK limited companies and is charged at 19% (20% up to 31st March 2017) on any profit generated within the year where there are no losses to bring forward.  

Corporation tax is due for payment within 9 months and 1 day of the accounting period end and is payable to HMRC. There are no advance payments on account to make.

VAT:  if annual turnover is less than £85,000 VAT is optional.  However, once the taxable turnover of the business exceeds £85,000 in the last 12 month period you must register for VAT (unless this is an exceptional year e.g. one-off large sales invoice).

Once registered, you should charge your customers at the standard 20% rate VAT (unless it falls within the reduced or zero-rated sales).

There are various accounting schemes that allow you to simplify calculating VAT and choosing the best one can benefit you and your cashflow.

However, whatever the VAT scheme method you must pay the appropriate amount of VAT to HMRC when required to do so.  

Remember:  VAT is not your money and you are purely collecting it on behalf of HMRC. Therefore you must ensure that you take account of any VAT liability before you pay yourself.

PAYE:  when you take out a salary, or when you employ staff, you may be required to pay PAYE (tax & national insurance).  The company may also be expected to pay a percentage for national insurance as well.

income tax is taxed at a basic rate (20%) and a higher rate (40%).  The level of income received will dictate what percentage of your income will be taxed at the higher rate band.  A tax-free personal allowance is provided to allow you to earn a certain amount (2018/19: £11,850) before tax (at the basic rate) is charged.

National Insurance is also deducted at a rate of 12% for employees.  This kicks in once the lower earnings limit is reached.

As mentioned above, employers national insurance is charged to the employer at a rate of 13.8% after the NI free amount.

Personal Tax:  In addition to the above, and though this is not the businesses responsibility to pay, you will normally be required to pay tax on the salary and dividends that you receive, above a certain level.