Frequently Asked Questions

From frequently asked questions to current developments.

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Corporation Tax

Discount TaxMost limited companies will pay 19% corporation tax on all profits.

Personal Tax

When to pay personal taxIf you have sources of income in addition to employment, tax will be calculated as part of the Self-Assessment return. Tax due for the 2020/21 tax year is due on 31 January 2022, the same day that your Self-Assessment return is due.

However, if you will have income from other sources in the 2021/22 tax year, you will need to make tax payments on account, these are based on the tax paid in the previous year. The first payment on account is also due on 31 January, the second payment is due 31 July.

How much tax on dividendsA company pays dividends to shareholders from company profits.  Dividends could be paid to you from your own company of which you are a shareholder, or any other company in which in you own shares.  Either way, any dividends over the £2000 annual dividend allowance is taxable. 

Tax due on dividends depends on your income tax band as follows: 

  • Basic rate:  7.5%
  • Higher Rate:  32.5% 
  • Additional Rate:   38.1%

How to calculate personal taxIncome earned through employment is taxed at source, using a tax code. HMRC issues your employer with a tax code. The current tax code used for most people who work for one employer is 1257L. That means that £12,570 per year or £1047.50 per month is tax free.  Earnings above this and up to £50,270 is taxed at 20%. Earnings between £50,270 and £150,000 is taxed at 40%, with earnings above £150,000 at 45%. If you earn more than £125,140, then there is no personal allowance. If you have any income not taxed at source, the tax payable will be calculated as part of the Self-Assessment tax return.  

National Insurance

National contributions increaseFrom 6 April 2022, National Insurance contributions will increase by 1.25%. This change will affect employees, employers as well as the self-employed. This increase will be used to fund health and care costs.

Value Added Tax

booking.svgThe threshold for VAT registration is £85,000. If your annual business turnover exceeds this threshold, you must register for VAT. You can also choose to register your business for VAT if your annual turnover is below this threshold. We can assist you in registering for VAT and ensuring that you remain compliant.

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