Do sole traders pay corporation tax?

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Hello

I need to know how things work taxing sole traders. I’m aware that I need to register for self-assessment for the money I’m taking out of my business as a sole trader. What I’m not aware of is whether I will also need to pay corporation tax for business activities. Help!!

Thanks

Ewan

Answers

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No, sole traders do not pay Corporation Tax. Only limited companies are required to pay Corporation Tax. As a sole traders, you will have to pay Income Tax and National Insurance (Class 2 and Class 4) on their total annual earnings at the end of each tax year. You may also have to pay VAT.

The following tax and NI rates apply for the 2015-16 tax year:

Income Tax

Basic rate 20%: £0 - £31,785

Higher rate 40%: £31,786 - £150,000

Additional rate 45% Above £150,000

Income Tax is applied when your earnings exceed your tax-free Personal Allowance. This is set at £10,600 for the 2015-16 tax year.

National Insurance

Class 2: £2.80 per week if your annual profits are at least £5,965 Class 9: 9% on profits between £8,060 - £42,385 2% on profits above £42,385

Value Added Tax

20% if you VAT-taxable turnover (total income, not profits) exceeds £82,000 in a 12 month period. You can also register voluntarily even if your income is below the registration threshold.

a year ago
 

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