How can I Calculate PAYE, VAT and Corporation Tax?

Do you want to know how much your business will have to pay in VAT for the next quarter? Perhaps you’re not sure how to calculate your PAYE bill? Or do you want a better idea of your Corporation Tax liability for the tax year?  

HMRC has a wide range of powers to enforce the payment of taxes which can ultimately lead to the closure of a company. With this in mind, it is essential you have an idea of your tax liability before a payment becomes due.  

PAYE

As an employer, it’s your responsibility to manage a PAYE (Pay As You Earn) scheme as part of your payroll. PAYE is what HMRC uses to gather income tax and National Insurance contributions from employees. If your business is a limited company, the company owner and directors are also liable for PAYE.

You can use this calculator to work out the PAYE liability for employees, company directors and company owners. You can also use these PAYE tables to manually check your payroll calculations.

VAT

If your company exceeds the income threshold for any 12-month period then you must register for VAT. Once registered, you will usually submit a VAT return to HMRC every 3 months. Your VAT return will include various calculations, including:

  • Your total sales and purchases
  • The amount of VAT you owe
  • The amount of VAT you can reclaim
  • Your VAT tax refund from HMRC

To calculate VAT, you must know when to charge VAT, the VAT rates that apply, and the amount of VAT you can claim back on items sold inclusive of VAT. There are also some items you should not charge VAT on.

There are a number of different VAT schemes and the amount you pay will depend on the particular scheme you use. Find out more about the cash accounting; flat rate; and annual accounting scheme.

Corporation Tax

Every limited company has to pay Corporation Tax on its profits from doing business. You do not receive a Corporation Tax bill. Instead, there are specific things you must do to report and pay your tax liability. To work out your Corporation Tax bill you must keep accounting records and prepare a Company Tax return.

Corporation Tax is paid on ‘taxable profits’. You can calculate your taxable profits by deducting allowable business expenses from your turnover. You can then use this simple tool to calculate your Corporation Tax for a particular tax year.

If your company is unable to pay Corporation tax when it becomes due, your business could be insolvent. Our insolvency calculator will help you determine whether this is the case.

Read more about HMRC

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