If you are about to establish or have already established a limited company you must be on top of PAYE. This can be a difficult step for people when they want to transition from being a sole trader into creating a limited company. The moment you create a limited company you become an employee and must pay tax as an employee meaning that tax must be deducted through the PAYE scheme. It is important to remember this does not apply to any dividends you receive from your company.
VAT becomes applicable to you and your business when your turnover exceeds £85,000. Before this amount you should not be paying a VAT charge. If your business has already exceeded or is going to exceed this amount in the next 30 days you must register for VAT.
Once registered you will have a choice of which scheme to join. We will help you decide which is best for you and your business. If the turnover of your business is below £150,000 then you can join the Flat Rate Scheme. Under this scheme a percentage of your turnover will be given to HMRC. The amount will be determined by the set rates for the industry that you are operating in. Under this scheme cannot claim back VAT on purchases.
If your turnover is below £1.35 million you can join the Cash Accounting Scheme where small businesses only pay VAT on what they earn per quarter. This is a good way of organising your VAT payments if you want to your accounts to be updated regularly. You can even pay in advance with the Annual Accounting Scheme where you can pay before your tax is calculated and then once it has been worked out, either you pay the remaining balance or HMRC reimburses you for an over-payment.
We look at all the options available to you and advise you on all the different outcomes each scheme brings. Call Keith Keen of SKP Accountancy on 020 8468 1049 or e-mail firstname.lastname@example.org today to find out more.