Where do our taxes go?
They say only two things are guaranteed in life: death and taxes. Today, we’re going to focus on the latter. As a business owner, there is a wealth of taxes that you need to pay. But what do they go towards?
We all know that our taxes go to the government to spend on the country, but where exactly do they go? Let’s have a look at the types of taxes you have to pay and where that money ends up.
There are various taxes your business needs to pay. Here are just a few that you will come across:
- Income tax – This is paid on your wages, so if you pay yourself through your company, you have to pay income tax on your earnings. You have to be earning a certain amount (around £12,500) before it kicks in.
- National Insurance – This isn’t a tax per se, but because it’s taken from your earnings, it serves the same purpose.
- VAT – If your business makes sales over £85,000, you have to register for VAT. It means that sales have a 20% VAT rate added on top.
- Corporation tax – If your limited company makes a profit, it is liable for corporation tax. Note that this tax doesn’t apply to sole traders.
- Business rates – Think of this as council tax, but for business properties. If you have an office or retail premises, you may have to pay business rates. If you run your business from your home, you (usually) won’t have to pay.
These are just for businesses – you will also likely pay taxes in other aspects of your life. It includes any vehicles you use, energy use, property taxes – the list goes on.
Where does our tax money go?
You should get a letter every year telling you where your money is being spent. When your annual tax summary comes through the letterbox in January, it has a pie chart breaking down where the money goes. It covers everything from welfare and health (the NHS) to education and defence. Though this list is far from expansive.
Here’s a breakdown of just how much money goes to which areas. Across the UK, we raise close to a trillion pounds through tax. Effectively, it pays for everything to keep the country running. To make sure the roads are paved, the streetlights are on, the emergency services are still going, and people are safe.
This year, the money has gone to help people during the coronavirus pandemic. So much of your tax money will have gone to business loans to keep them afloat, statutory sick pay, and mortgage and rent holidays.
Say what you will about taxes, they keep the country going. They can be a head-scratcher as a business owner if you don’t know where to start. But there are others out there who can teach you everything you need to know and help keep your finances in order.
At Big Hand, we are your tax specialists. As expert business accountants, we’re no stranger to helping companies navigate the waters of taxes. If you would like to know more, get in touch on 0161 327 2911.