Small business tax: what do you have to pay HMRC?

The taxes at a glance

Most small businesses deal with some mix of these:

• Income Tax and Class 4 National Insurance. Paid by sole traders and partners on their profits, through Self Assessment.
• Corporation Tax. Paid by limited companies on their profits.
• Dividend tax. Paid personally by company owners who take dividends above the allowance.
• PAYE and employer National Insurance. Paid by any business that runs a payroll, including a company paying its director a salary.
• VAT. Charged on sales and paid over by businesses that are VAT registered.
• Construction Industry Scheme (CIS). Deductions taken from payments to subcontractors in construction.

Not everything a business pays goes to HMRC. Business rates on a shop, office or other premises are paid to the local council, not HMRC.

Sole traders: Income Tax and National Insurance

If you are self-employed, your business profit is added to any other income you have and taxed through Self Assessment. Profit means your income less your allowable business expenses. Our guide to expenses the self-employed can claim covers what counts. Our guide on how much tax the self-employed pay works through the figures.

Income Tax rates for 2026/27

These are the rates for England, Wales and Northern Ireland. Scotland has different bands.

• Personal Allowance: the first £12,570 of income is tax free
• Basic rate, 20%: £12,571 to £50,270
• Higher rate, 40%: £50,271 to £125,140
• Additional rate, 45%: over £125,140

The Personal Allowance goes down by £1 for every £2 of adjusted net income over £100,000. At £125,140 or more, there is no allowance at all.

National Insurance for the self-employed

Class 4 National Insurance is charged at 6% on profits between £12,570 and £50,270, and 2% on profits above £50,270.

Class 2 works differently now. If your profits are £7,105 or more, you do not pay it, but it is treated as paid to protect your State Pension record. If your profits are below that, you can choose to pay voluntarily at £3.65 a week.

A worked example

Self Assessment deadlines and payments on account

For the 2025/26 tax year, the online return and any tax owed are both due by 11:59pm on 31 January 2027. If you need to send a return for the first time, you had to tell HMRC by 5 October 2026. Our guide on registering as self-employed explains how.

Many people also make payments on account. These are advance payments towards next year's bill, each usually half of the previous year's tax, due by 31 January and 31 July. You do not have to make them if last year's bill was under £1,000, or if more than 80% of your tax was already paid another way, such as through your tax code.

In the example above, if no payments on account had been made, the sole trader would pay the £7,131.80 balance by 31 January after the tax year ends, plus a first payment on account of £3,565.90 towards the next year. A second payment of £3,565.90 would follow on 31 July. That first January is often the biggest bill a new business faces, so it pays to set money aside through the year.

Making Tax Digital for Income Tax

Sole traders and landlords with qualifying income over £50,000 in 2024/25 should have started using Making Tax Digital for Income Tax from 6 April 2026. The threshold drops to £30,000 from 6 April 2027 and to £20,000 from 6 April 2028. That means keeping digital records and sending quarterly updates through compatible software.

Limited companies: Corporation Tax

A limited company pays Corporation Tax on its taxable profits. For accounting periods in the financial year starting 1 April 2026, the rates are:

• Small profits rate, 19%: profits of £50,000 or less
• Main rate, 25%: profits over £250,000
• Marginal Relief: profits between £50,000 and £250,000 pay the main rate, reduced by Marginal Relief, so the effective rate sits between the two

The £50,000 and £250,000 limits are reduced for short accounting periods, and reduced again if the company has associated companies.

Taking the same £40,000 profit from the example above, a company would pay Corporation Tax at 19%, which is £7,600. That is not the end of the story, because the owner still has to take money out of the company, and that can bring more tax.

When Corporation Tax is due

There are two separate deadlines, and the payment comes first:

• Payment: 9 months and 1 day after the end of the accounting period, for companies with taxable profits up to £1.5 million. Larger companies pay in instalments.
• Company Tax Return: 12 months after the end of the accounting period.

Our guides on paying your Corporation Tax bill and year-end accounts cover the process in more detail.

Company owners: salary and dividends

The money in a limited company belongs to the company, not to you. Directors usually take it out as a salary, as dividends, or both. For a side-by-side comparison, see our sole trader vs limited company tax breakdown.

• Salary goes through payroll, and the company deducts Income Tax and National Insurance before paying it.
• Dividends are paid from profits after Corporation Tax. A company must not pay out more in dividends than its available profits.

Everyone has a £500 dividend allowance. Above that, dividends in 2026/27 are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band. See our guides on dividend tax rates and paying yourself a director's salary.

If you employ people: PAYE and employer National Insurance

Once you run a payroll, you collect Income Tax and employee National Insurance from your staff's pay and pass it to HMRC. You also pay employer National Insurance on top.

• Employer National Insurance: 15% on earnings above £5,000 a year (£96 a week, £417 a month)
• Employment Allowance: up to £10,500 off your employer National Insurance bill for 2026/27, if you are eligible
• When to pay: by the 22nd of the next tax month, or by the 19th if you pay by cheque in the post. Businesses that pay quarterly pay by the 22nd after the quarter ends, for example 22 July for the quarter from 6 April to 5 July.

Late PAYE payments can lead to interest and penalties, so the payroll date and the HMRC payment date are worth keeping side by side.

VAT

VAT is not a tax on your profit. You charge it on your sales, reclaim the VAT on your business purchases, and pay HMRC the difference. The rates are 20% standard, 5% reduced and 0% for zero-rated goods and services.

When you must register

You must register if your taxable turnover for the last 12 months goes over £90,000. You then have 30 days from the end of the month you went over to register. You must also register if you expect your taxable turnover to go over £90,000 in the next 30 days alone.

The 12-month test is a rolling one, so it needs checking every month, not just at the year end.

VAT returns

Most businesses send a VAT return every 3 months. The deadline to submit and pay is usually one calendar month and 7 days after the end of the period. Our guides on filing a VAT return, reclaiming VAT and the different VAT schemes go further.

Construction: the CIS

If you pay subcontractors for construction work, you must register as a contractor under the Construction Industry Scheme. You deduct money from their payments and pass it to HMRC. The deduction is 20% for registered subcontractors and 30% for those who are not registered. Subcontractors with gross payment status have no deductions taken.

If you are a subcontractor, the deductions count towards your own tax bill, and you may be due money back. See how CIS tax works.

Key dates for 2026/27

• 22nd of each month: PAYE due for the previous tax month (19th by cheque)
• One month and 7 days after each VAT quarter: VAT return and payment
• 9 months and 1 day after the company year end: Corporation Tax payment
• 12 months after the company year end: Company Tax Return
• 31 January 2027: 2025/26 Self Assessment return, balancing payment and first payment on account for 2026/27
• 31 July 2027: second payment on account for 2026/27

Why the books decide the bill

Every figure above starts with your records. Profit for Income Tax and Corporation Tax comes from your sales and costs. VAT comes from the invoices you raise and the ones you keep. PAYE comes from payroll. If a cost is missing, you pay tax on profit you did not make. If a VAT invoice is missing, you may not be able to reclaim that VAT on the return.

Records that are kept up to date also tell you, during the year, roughly what you will owe. That makes it far easier to set money aside rather than finding out in January. Our guide on how long to keep business records covers what to hold on to.