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HMRC, VAT, Self Assessment and more

Tax Handbook

3–4 hours· 7 chapters·3 free

Tax is one of the most important — and most misunderstood — aspects of running a business. This handbook explains the UK business tax system in plain English, covering Self Assessment, VAT, Corporation Tax, PAYE and expenses. You don't need an accounting qualification to understand your tax obligations — you just need the right guide.

Please note: This handbook is for general information only. It is not legal or financial advice. Always check current regulations and seek professional guidance where needed.

The UK tax system can seem complicated, but the underlying structure is straightforward. The type of tax you pay depends on your business structure and the nature of your income.

Sole traders pay Income Tax and National Insurance on their business profits through Self Assessment. The tax year runs from 6 April to 5 April, and you file your return and pay any tax owed by 31 January the following year.

Limited companies pay Corporation Tax on their profits. Directors and shareholders pay Income Tax on salaries and dividends through their personal Self Assessment returns.

VAT is a separate tax on the sale of goods and services. If your turnover exceeds £90,000, you must register. VAT is collected from customers and paid to HMRC, minus any VAT you've paid on business purchases.

PAYE (Pay As You Earn) is the system for collecting Income Tax and National Insurance from employees. If you have staff, you're responsible for operating PAYE and paying the deductions to HMRC.

Good to know

  • Understand which taxes apply to your business structure before you start trading
  • Set aside money for tax from your first payment — it's not your money
  • Use HMRC's online tools and guidance — they're comprehensive and free
  • Consider an accountant for your first year — the investment usually pays for itself

Watch out for

  • Assuming tax is something to deal with at the end of the year — plan throughout
  • Confusing turnover with profit — you pay tax on profit, not turnover
  • Not understanding the difference between Income Tax and National Insurance
  • Ignoring tax obligations until HMRC contacts you

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