Frequently Asked Questions (FAQs)

Corporation Tax FAQs

What's the difference between the small profits rate and standard rate?

19% applies to profits under £50,000, increasing gradually to 25% for profits over £250,000 through marginal relief. Also to add if you have two companies the small profits rate will be divided between the two companies at £25,000 per company.

Can I pay myself a salary to reduce Corporation Tax?

Yes, director/employee salaries are tax-deductible expenses that reduce company profits and therefore Corporation Tax.

Are dividends tax-deductible for the company?

No, dividends are paid from post-tax profits and aren't deductible when calculating Corporation Tax.

Can we claim for family members working in the business?

Yes, if they genuinely work in the business and are paid a reasonable market rate for their role.

How do we handle company cars for tax purposes?

Company cars generate a taxable benefit for the employee/director and have specific Corporation Tax implications based on CO2 emissions.

How are director's loan accounts treated for Corporation Tax?

Loans to directors not repaid within 9 months after year-end incur a 33.75% tax charge (S455), refundable when the loan is repaid.

Income Tax FAQs

What's the most tax-efficient way to pay myself?

Most small business owners optimise with a small salary (typically up to the National Insurance threshold) plus dividends. Dividends have different tax rates (8.75%, 33.75%, 39.35%) and a tax-free allowance (currently £500). The dividend tax is above Corporation Tax and therefore, it is very important to ensure that the total tax paid is minimum.

What business expenses are tax-deductible? Can I claim for my home office expenses?

Expenses must be "wholly and exclusively" for business purposes - including office costs, travel, staff costs, professional fees, and marketing. Yes, either via simplified flat rate (up to £6 per week) or by calculating the actual proportion of home costs used for business.

Do I need to complete a Self Assessment tax return? When are tax payments due?

Yes, if you're self-employed, a company director, or receive other income beyond PAYE employment. Self Assessment deadlines are January 31st for final payment and balancing the previous tax year, with payments on account due July 31st.

How do I handle losses in my business?

Losses can be offset against other income in the same year, carried back to previous years, or carried forward to future years.

PAYE, NIC, Pension Scheme FAQs

When do I need to register as an employer?

As soon as you decide to hire someone who will earn above the National Insurance Lower Earnings Limit (currently £123 per week).

What information do I need to collect from employees?

Their P45 from previous employment, or have them complete a starter checklist. You'll need their full name, date of birth, NI number, and address.

When and how do I pay HMRC?

Monthly by the 22nd (or 19th if paying by post) of the following month, unless you qualify as a quarterly payer.

What are my reporting obligations?

Submit Full Payment Submissions (FPS) to HMRC on or before each payday and an Employer Payment Summary (EPS) if needed.

Can you help with PAYE registration and returns?

Yes, we provide complete PAYE support. The initial PAYE registration (one-off fee of £85) and with our PAYE package we will be managing ongoing PAYE returns to maintain compliance. We'll ensure you're registered correctly and meeting all HMRC requirements.

How do I handle workplace pensions?

All employers must provide a workplace pension scheme and automatically enrol eligible staff.

Who must be auto-enrolled?

Employees aged 22 to State Pension age earning over £10,000 per year (£833 monthly).

When must I start a workplace pension scheme?

On your "duties start date" - the day your first employee begins work. Unless you opt in for postponement, then you can delay auto-enrolment by up to 3 months, but must notify employees in writing.

How much do employers contribute?

Minimum 3% of qualifying earnings, while employees contribute at least 5% (8% total minimum).

Can employees opt out?

Yes, but you must auto-enrol employees first. Employees can opt out within one month for a full refund of contributions by calling directly the pension provider.

Do I need to submit a declaration of compliance? What are the penalties for non-compliance?

Yes, to The Pensions Regulator within 5 months of your duties start date, even if you have no eligible staff. Fixed penalties start at £400, with escalating daily penalties from £50 to £10,000 depending on staff numbers.

UK Landlords FAQs

What expenses can I deduct from my rental income?

Allowable expenses include insurance, repairs (not improvements), letting agent fees, utility bills you pay, and property management costs.

How is mortgage interest tax relief calculated now?

Mortgage interest is no longer fully deductible. Instead, you receive a basic rate tax credit (20%) on your finance costs.

Can I claim for replacement furniture and appliances?

Yes, the Replacement Domestic Items Relief allows you to claim for like-for-like replacements of furnishings, appliances, and kitchenware.

What is the £1,000 property allowance?

A tax-free allowance for property income. If your income is below £1,000, you don't need to report it. If above, you can deduct either £1,000 or your actual expenses.

How do I handle joint ownership with my spouse?

By default, income is split 50/50, but you can submit Form 17 to HMRC to declare a different split based on actual ownership percentages.

Do I need to pay Capital Gains Tax when selling a rental property?

Yes, at 18% or 24% depending on your income level, minus your annual CGT allowance. You have 60 days to report and pay after completion..

Should I own my property personally or through a limited company?

This depends on multiple factors including your income level, future plans, mortgage options, and potential stamp duty implications for transfers.

Value Added Tax (VAT) FAQs

What is VAT Registration Threshold? Should I register for VAT before reaching the threshold?

From April 2025, the VAT registration threshold rises to £90,000, allowing more small businesses to operate VAT-free. This brings multiple benefits: no VAT charging requirements, reduced paperwork, simpler accounting, potentially more competitive pricing, and better cash flow. Businesses below this threshold can still register voluntarily if advantageous, especially when working mainly with VAT-registered clients. This change reflects an important policy shift to support small UK businesses. It depends on whether your customers are VAT-registered and if your purchases have significant VAT that could be reclaimed.

When do I have to register for VAT?

You must register for VAT when your taxable turnover exceeds £90,000 in a rolling 12-month period or will exceed this threshold in the next 30 days alone. This figure represents your total sales of VAT-applicable goods and services. You can register voluntarily below this threshold if beneficial (such as when selling to VAT-registered businesses), but once registered, you'll need to charge VAT, submit quarterly returns, and maintain detailed VAT records.

Can you help with VAT registration and returns?

Yes, we provide complete VAT support. For unregistered businesses the initial VAT registration is a one-off fee of £85. Our VAT package services include handling your ongoing VAT returns to maintain compliance on a quarterly basis. We'll ensure you're registered correctly and meeting all HMRC requirements.

Can I claim VAT I paid on the products and services I bought before registering for VAT?

Yes, you can reclaim VAT paid before your VAT registration date, within certain time limits: Goods: You can claim VAT on purchases made up to 4 years before your registration date, as long as you still have these goods or they were used to make other goods you still have. Services: You can claim VAT on services purchased up to 6 months before your registration date. For both categories, you'll need to provide valid VAT invoices or receipts as evidence of your purchases and the VAT paid. This can provide a valuable cash injection for newly VAT-registered businesses, so be sure to gather all relevant documentation when preparing your first VAT return.