When you start taking on work as a contractor you’re liable for a bunch of different business taxes. So as well as paying individual taxes that you’re probably already familiar with you’re now going to have to start paying this.
1. Corporation Tax.
All companies pay a tax on their annual profits. Your accountant will have to inform HMRC you’re company has been formed. You’ll have to submit a form each year called the Corporation Tax Return. You’ve got to pay the previous years tax within 9 months of the company year. If you don’t do this you can be fined.
2. Value Added Tax
If you breach £85,000 in turnover you have to register for vat. You can register before but it isn’t necessary. Instead of paying vat on each transaction you pay it on your turnover. Your accountant can complete a VAT return for you.
3. Employers’ National Insurance
Your company is liable to pay 13.8% on your salary you draw.
5. Income Tax
You will pay income tax on any income you receive if it’s above the personal allowance threshold £11,500 received above the personal allowance threshold. Your accountant will be able to advise you further on this.
6. Dividend Tax
The first 5k you get in dividends are in a null band for when it comes to taxes. So even though they do still form a part of your overall tax allowances. In 2018 this is planned to be changed to 2000.
Dividend income tax is then taxed at 3 different rates. Have a google and see what u can find on how dividends are taxed.
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