As a start-up business owner, you’ve got a long list of factors to consider including business plans, strategy, funding – not to mention, tax. The likelihood is that you will have to pay it but there are a few different types meaning your business can be affected in a number of ways.
To save you the time of looking them up and trying to figure out their intricacies, we’ve detailed the various forms in our tax guidance for hospitality start-ups.
This is a tax on your earnings, but not all income will be subject to it. You’ll pay this not only if you own a business, but on income via employment, state benefits, rental properties, pensions and even interest from savings. However, it doesn’t apply to the first £1,000 of income. And, you also have a tax-free Personal Allowance – currently this sits at £12,500 in the 2019/2020 tax year.
There are a few different types of National Insurance (NI), which depend on your employment status and how much you earn. Class 1 NIs are paid by employees earning above £166 a week, Class 2 NIs are required if you’re self-employed and have profits over £6,365, Class 3 are voluntary contributions and Class 4 NIs will apply to self-employed people earning over £8,632.
Limited company directors often pay themselves a salary as an employee, and so Class 1 NIs will need to be deducted.
If you do opt to provide services as a limited company, then you’ll need to register for Corporation Tax and pay it on any profits. You will also have to pay this type of tax on any money made from investments and assets that you sell for more than you bought them for.
Tax on dividends
As a business owner, you’ll earn shares and receive a dividend payment. If this amount is above the dividend allowance (currently £2,000), then you pay tax on these. The amount paid depends on the Income Tax band you’re in.
VAT may or may not be relevant to you. If you earn over the VAT threshold at the time (currently £85,000), you will need to pay the VAT charged on your sales to HMRC. However, you can also claim back any VAT that you pay when making purchases. Many hospitality businesses opt to register for VAT even if they are below the threshold. This is because it can be tax efficient, and boost their reputation.
If your start-up uses a building, or any part of one, for non-domestic purposes then you’ll probably have to pay business rates. Your local council will inform you of the relevant amount, and may also offer a relief scheme. Buildings used for welfare or disabled people are exempt from paying business rates.
Depending on how quickly your hospitality start-up accelerates, you could end up paying the Apprenticeship Levy which is paid on annual paybills in excess of £3 million. Brought in to fund new apprenticeships, the levy will be charged at a rate of 0.5% of a paybill.
It’s important to remember that all of the above taxes depend on various factors – from your paybill to how you operate. It’s not easy to figure out which taxes you need to pay, let alone the calculations that come with them. That’s why many choose to focus on their actual hospitality enterprise – rather than the numbers – and outsource their accounts to an expert like Nabarro Poole.
We’ve been helping businesses like yours for over a decade. From dealing with taxes to management accounts, you can have trust in us. We’ll not only sort out the figures but help give your start-up the boost it needs to grow. Get in touch with our friendly team today, and we’ll talk through your requirements.