It is likely that taxation will be relevant to your business in one way or another, although the taxes that will be relevant to you will depend upon the nature of your business and the business structure that you have decided upon. The main taxes that you are likely to have to consider are:

Income Tax & National Insurance
• Corporation Tax
• VAT

Income Tax & National Insurance

As soon as you commence Self-Employment it will be necessary to notify the Inland Revenue of this change in your status, with failure to do so within the first three full months of self-employment resulting in a fine of £100.

Once you are registered it will be necessary to complete a Self-Assessment Tax Return each year, and a Partnership Return if your business is a Partnership. You will be taxable on your profits in each tax year, or on your share of Partnership profits if you are in a Partnership.

Self-employed persons also have to pay Class 2 and Class 4 National Insurance.

If your business is a limited company and you are a director of that company you will pay tax and Class 1 National Insurance through PAYE and you will have to fill in a Tax Return each year. Any dividends paid to you from the company will also be subject to tax at source.

Corporation Tax

If your business is a limited company, then the profits of that business will be subject to Corporation Tax.

VAT

You will need to register for VAT if you believe that your VAT-able sales are likely to exceed £56,000 in the next twelve months. It is important to take advice from a tax adviser on whether the products/services your business supplies will be subject to VAT, or if they will be exempt. Failure to register for VAT when you are required to do so can lead to penalties, as well as having to account to Customs & Excise for VAT that should have been paid.