There are a range of considerations for what tax you pay and when, many of which will be new to you if you’ve always been an employee.

Registration

All self-employed people must register their business with HM Revenue and Customs (HMRC).

If you’ve set up a Limited Company, you are not self-employed – you are a company director. In this case form CT41G is sent to the Company’s registered office for completion by the Directors.  Its purpose is so that the Directors can provide HMRC with information about themselves and their company. 

Personal Taxes

Income tax is the tax you pay on the profits you make from self-employment and other income such as from other employments and dividends.  You have a tax-free personal allowance, to set against this income.  Don’t forget tax is no longer deducted from your pay, as it was if you were employed. You’ll need to put money aside to pay your tax bill yourself. Your self-assessment tax is due on the 31st January following the end of the tax year.

As a self-employed person, you also need to make sure your National Insurance record is kept up to date, so you can benefit from the full state pension in the future. There are a number of difference classes and rules around these contributions depending on the level of profit your franchise makes. At the Franchise Accounting Specialists we can help you navigate this and pay yourself in the most tax efficient way. 

Business Taxes

Limited companies pay corporation tax on the profits of the franchise business. The Corporation tax rate varies depending on the profitability of the business. 

Business rates may be payable if your franchise business is in an office or shop. It’s similar to the council tax on personal homes. You should check with your local council to see if you qualify for small business rate relief, which can be up to 100%.

VAT

VAT is a tax on consumer expenditure and is ultimately paid by the final customer. VAT returns are submitted to HMRC every quarter by all VAT-registered businesses.

VAT is rated in a range of ways depending on the type of goods and can be 20%, 5% or zero rates. Plus some supplies are exempt. 

All franchise businesses with a turnover in excess of £90,000 must register for VAT. Turnover is measured on a 12-months rolling basis, or if the trader suspects they may exceed the threshold in a single 30-day period. You will also need to consider if it’s beneficial to be VAT registered from the outset.  We can help you decide that. 

Payroll

If you plan on becoming an employer, then setting up a payroll from the start is a must, and often, as franchise owners, we can forget that we need to be paid too! Our team at the Franchise Accounting Specialists will help you set up and maintain an efficient payroll system for your business.

As your franchise business begins and as it starts to grow, an accounting system that provides you with appropriate information is a vital for success. 

Whether you are a sole trader or corporation, the Franchise Accounting Specialists have made it simple for you with a range of packages suitable for every stage of your franchise journey. Get in touch with us to see how we can help: https://franchiseaccountingspecialists.co.uk/contact