Importance Of Tax Consultancy

Besides understanding the industry one operates in, understanding the financial aspect of a business is very important. Without in depth understanding of business finance, the continuity of the business is at risk. Part of this includes understanding tax and why it is important for a business to pay taxes within the required period. If the business owner does not understand taxation, it is important to hire Tax advisers to ensure things are done in the right way.

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Business taxation

There are different types of taxes that businesses are subject to. Corporate tax can be defined as the tax charged on the net income of businesses. All businesses that are registered as limited liability companies and that made a profit in the concluded financial period must declare and pay taxes based on their level of income. This tax is currently charged at the rate of 20% although the government has expressed interest to reduce this before 2020.

Value Added Tax (V.A.T)

This tax is charged at each stage of production but can be defined as the tax that is charged on the final value of goods and services that are consumed within the UK. The current tax rate is at 20% and all businesses whose annual turnover is or exceeds £85,000 is expected to register for VAT. The VAT returns are filed online and the outstanding amounts are paid electronically.


This is tax that is charged on the income of individuals who work in a specific organisation. All employees of a limited liability company or partnership or even a large sole proprietorship are expected to pay P.A.Y.E. remember that since employees are paid monthly, the government expects you to file P.A.Y.E monthly and not at the end of the year like other taxes.

Capital gains tax

This tax is charged on any surplus made after the disposal of a business asset including property, equipment or any other type of asset.

Stamp duty

Businesses are expected to pay stamp duty for such transactions as transfer of ownership on land, shares, property, long term leases and agreements as well as other types of assets. There are two types of stamp duty; stamp duty land tax that is applicable when businesses first rent or buy property and stamp duty reverse tax which is applicable for the purchase of such things as shares.

Other types of tax

Excise duty, national insurance, gambling tax and dales tax are other types of taxes that are applicable to a business. There are taxes that may be industry specific like gambling tax while others like national insurance apply to all organisations.

Importance of understanding tax

As a business, you need to understand how to compute different types of taxes, file them within the stipulated period and pay them through the stipulated channels. Without an in depth understanding of taxation, a business can lose a lot of money due to erroneous calculations. The business may also miss out on important deadlines that may lead to penalties. Moreover, there are legal ways to reduce tax such as through the allowable tax reliefs and credits. When a business does not understand these, it will be hard to take advantage of them.

Taxation is a complicated subject and not everyone may be able to grasp it. This is why tax advisers exist. They ensure that your business honours all their tax obligations as they fall due. They also help the business not to pay excessive taxes by taking advantage of legal tax planning measures.