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How Does Taxation Affect Businesses?

Your business may become affected by sector taxes, which means it is important to ensure you are complying with any sector tax obligations. In this blog post, we will look at how taxation can affect your business.
How Does Taxation Affect Businesses?

Your business may become affected by sector taxes, which means it is important to ensure you are complying with any sector tax obligations. As well as this, there may also be opportunities to reduce your tax costs. In this blog post, we will look at how taxation can affect your business.

Employees don’t often need to spend a lot of time thinking about tax and National Insurance as this is directly deducted from their gross monthly salary, leaving each employee with the remainder.

However, running your own business is very different. It is important that you take responsibility for paying the correct amount of tax on your business profits in line with any National Insurance contributions.

Do businesses pay tax?

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A corporate tax or business tax is charged on the profits a company makes. Corporation Tax is similar to Income Tax but for companies, meaning that as soon as your business starts making a profit, it needs to start paying Corporation Tax at the correct rate.

Business taxation affects a business’s costs. For example, a rise in corporation tax has the same effect as an increase in costs which can lead to raised prices within the business. Other business taxes include environmental taxes such as landfill tax, and VAT (value-added tax).

How do interest rates affect business?

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In the UK, the level of interest rates is determined by the Monetary Policy Committee who is appointed by the government. A rise in interest rates could raise the costs for businesses borrowing money, potentially causing consumers to reduce expenditure – which could lead to a fall in business sales.

Government spending policy also affects business. So, if the government spends more money on schools, then this will increase the income of businesses which supply schools with their equipment such as books and uniform.

The government does also provide subsidies for businesses. For example, there is an employment subsidy to help take on the long-term unemployed.

How do I know how much tax to pay if I am self-employed?

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In order to budget for your annual tax bill, you can use HMRC’s online tax calculator. If you think you’ve paid too much tax, you are entitled to claim a rebate. Contact HMRC via telephone to notify them of any mistakes you may have noticed.

For advice on any taxation issues, it is best you speak to your accountant. If you’re looking for business finance to help with cash flow or working capital, Esme Loans can help you. We offer business loans from £10,000* to £250,000 which are repayable over 1 to 5 years. All applications are submitted online using our 10-minute application form. If your application is approved, we will aim to transfer the funds to you within an hour.

To be eligible for a business loan with Esme Loans, you must meet the following requirements:

  • You must be a sole trader or Director of a UK Limited company
  • Be over 18 years old and a UK resident & homeowner
  • Have been actively trading for more than 3 years
  • Have a turnover of more than £50,000 per annum and a track record of making profit

How could Esme Loans help?

For more information about our loans and how to apply, click here.

*from £25,500 for sole traders