Business & Personal Tax Made Simple Omega2 Accounting
Frequently Asked Questions - please click on question for the answer
What is the difference between a limited company and a sole trader?
Which is the best option for me, a Limited Company or being a Sole Trader?
What is VAT and do I need to registered for it?
What is a self-assessment tax return?
If there is an accounting question you would like answered please e-mail us and we will endeavour to provide an answer here as soon as possible.
What is the difference between a Limited Company and a Sole Trader?
A limited company is a legal structure where the company's finances are separate from the personal finances of the owners. A limited company must have a director, a company secretary and shareholders. The company must be registered at Companies House and is required to make regular submissions to HM Revenue & Customs.
A sole trader is an individual working on their own account and without a corporate identity. This means that they are able to keep all the profits from their work but that they are personally liable for any debts run up in the course of trading. A sole trader must maintain records showing income and expenses and file an annual self-assessment tax return with HM Revenue & Customs.
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Which is the best option for me, a Limited Company or being a Sole Trader?
Each structure has its own benefits and its own drawbacks. Omega2accounting will be happy to review your situation and provide an assessment of the best approach.
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What is VAT and do I need to be registered for it?
Value Added Tax, or VAT, is a tax applied to the majority of goods and services. Any business or trader with a turnover exceeding £64,000 in a twelve month period must be VAT registered but businesses with a turnover less than the threshold may become voluntarily registered. HM Customs & Excise operate a number of schemes to make VAT easier for businesses to manage.
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What Taxes Do I Need to Pay?
The taxes payable by a company or trader depend on the structure of the business. A Ltd company is liable for Pay As You Earn (PAYE), National Insurance and Corporation Tax while a sole trader is only liable for National Insurance and Income Tax. VAT may be applicable to either structure depending on the levels of turnover.
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When Do I Pay Tax?
A Ltd company will make regular payments of PAYE and National Insurance during the financial year, probably either monthly or quarterly, and a single payment of Corporation Tax at the end of each company year. A sole trader will make two payments to HM Revenue & Customs each year, one in January and the second in July.
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Can I Pay Tax Online?
Most taxes can be paid online including PAYE andCorporations Tax.
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What is a Self-Assessment Tax Return?
This is an annual declaration of an individual's total income. The vast majority of the population are not required to complete a return as their income is fully, and correctly, taxed at source. For a full list of who is required to complete a self-assessment and more information on this topic please see our self-assessment tax guide. Returns can also be filed online.
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Do I Need an Accountant?
An accountant is not a statutory requirement for a business. The administrative work involved for the majority of sole traders is relatively straightforward though can be rather time consuming. A Ltd company does involve a greater amount of work, particularly if there are employees and a payroll to manage. Omega2accountingwill be happy to outline the requirements and likely time involved for each approach so that you are able to make an informed decision.
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What is a Benefit in Kind?
A service paid for by an employer for the use by employees often in addition to salary or wages. Such items as gym membership, a company car or health insurance, where paid for an employer, would be deemed a benefit in kind. Benefits in kind are taxable and this cost is often met by the employee.
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