In this world nothing can be said to be certain, except death and taxes – so said Benjamin Franklin as long ago as 1789.
As anyone responsible for running a busy professional practice might also add, the very same thing may still be said today.
As any professional practice – from doctors’ surgeries, to law firms, to accountancy partnerships – an increasingly competitive, technically sophisticated and challenging marketplace has done little to change the overriding certainty of taxes.
Your tax liability
Tax collection in the UK is the responsibility of HM Revenue & Customs (HMRC).
The tax regime is anything if not complicated and the tax liabilities your professional practice may face depend to some degree on the legal identity and structure of your business – whether it is a limited company or a partnership, for example.
The following may help to unpick some of the complexities of the current tax system:
Corporation tax
- Corporation Tax is payable by limited liability companies;
- it is (at the time of writing) a 19% tax on any profits made by any type of limited liability company;
Income tax
- Income Tax is just what it says – a tax on individual incomes;
- rates vary, according to taxable income – so that no tax is payable up to the personal allowance of £11,500, Basic Rate (20%) on incomes from £11,501 to £45,000, Higher Rate (40%) on incomes from £45,001 to £150,000, and Additional Rate (45%) on incomes in excess of over £150,000;
- the principles of personal income tax are also relevant when it comes to calculating tax liabilities for professional practices;
- accountants Lentils explain that partners in such professional practices are taxed on their share of the profits made by the practice – on a basis that is similar to that for the self-employed;
- each partner is taxed as though he or she is self-employed, taking a profit that is equal to his or her share in the profits of the practice;
- just like the self-employed, this also means that partners are not paying tax as they earn (PAYE), but face a tax bill in the future on what they have earned;
VAT
- however your practice is trading – whether as a limited liability company, a partnership or if you are a sole-trader – you must register for VAT if your income is more than £85,000 a year;
- VAT may be charged at the 20% standard rate, or a flat rat fee between 4% – 14.5% depending on your business type) a reduced rate of 5%, zero-rated or exempt from VAT altogether;
- VAT returns – together with the relevant payment – need to be made every three months;
Capital Gains Tax
- the liability of your practice for Capital Gains Tax (CGT) is generally reduced or removed altogether if the property being sold is used for business, rather than residential, purposes;
- once again, however, the rules on CGT are complicated and your practice may be liable for the flat-rate 20% tax on any chargeable asset which it sells.
Business tax funding practice loans
Although you may live with the knowledge that tax is a certainty, it is rarely possible to predict exactly what tax liabilities your practice may face. Naturally, this poses a considerable challenge for managing cashflow and ensuring that there is sufficient working capital to meet the tax liabilities when they fall due – something you aim to do, since the penalties for late payment may be severe.
In order to meet those demands, therefore, you might want to consider an unsecured fixed rate practice loan from us here at Professions Loans.
Such a loan may be used to help meet any of the tax obligations of your practice – whether that be partners’ income tax, corporation tax paid by your limited liability company, VAT or Capital Gains Tax.
These unsecured loans are available in any amount from £5,000 right up to £1 million (or even more, according to the size and status of your practice), and you may choose precisely the amount you may need to help meet your tax and VAT liabilities.
An unsecured loan such as this may also help to spread out the burden of actually paying the tax bill throughout the whole year – since monthly repayments are made at a fixed amount and determined by a fixed rate of interest throughout the term of your loan.
When used to fund any of your tax liabilities, an unsecured fixed rate loan may be arranged for any period between 3 and 12 months and we aim to get you a decision on your application for the advance within 48 hours of your application.