What You Need to Know
When starting or running a business in the UK, it’s essential to understand the different tax schemes available. Choosing the right scheme can affect how much tax you pay, when you pay it, and how you report it to HMRC. At AdminBooks, we help businesses make informed decisions with confidence and compliance.
Below are the main tax schemes available to businesses in the UK:
Standard VAT Scheme
- Who it’s for: Businesses with VAT-taxable turnover over £85,000 (VAT threshold)
- How it works: You charge VAT on your sales and reclaim VAT on your purchases. You must submit VAT returns quarterly.
- Best for: Businesses with consistent income and purchases throughout the year.
Flat Rate VAT Scheme
- Who it’s for: Small businesses with VAT turnover under £150,000
- How it works: You pay a fixed percentage of your turnover to HMRC. You can’t reclaim VAT on purchases (except on capital assets over £2,000).
- Best for: Service-based businesses with low expenses.
AdminBooks stands out by combining expert bookkeeping with trusted cloud-based solutions, delivering personalised support that keeps your business compliant and financially confident.
VAT Cash Accounting Scheme
- Who it’s for: Businesses with VAT turnover under £1.35 million
- How it works: You only pay VAT when your customers pay you and reclaim VAT only when you pay suppliers.
- Best for: Businesses with long payment terms or cash flow challenges.
VAT Annual Accounting Scheme
- Who it’s for: Businesses with turnover under £1.35 million
- How it works: Submit only one VAT return per year, making advance payments during the year.
- Best for: Businesses that prefer a simplified VAT process with predictable instalments.
PAYE Scheme
- Who it’s for: Employers
- How it works: You deduct Income Tax and National Insurance from employee wages and report to HMRC regularly.
- Best for: Any business with employees, even directors on payroll.
CIS (Construction Industry Scheme)
- Who it’s for: Contractors and subcontractors in the construction sector
- How it works: Contractors deduct tax at source from subcontractor payments and report it to HMRC.
- Best for: Construction and trade businesses working on site or with building services.
Self Assessment (SA) Scheme
- Who it’s for: Sole traders, partners, landlords, or directors with untaxed income
- How it works: Submit a Self Assessment tax return to HMRC annually to report income and expenses.
- Best for: Individuals with personal business income or multiple income sources.
Need Help Choosing the Right Scheme?
AdminBooks provides tailored bookkeeping, payroll, and VAT support to ensure you’re on the correct scheme and stay fully compliant with HMRC. Whether you’re just starting out or looking to grow, we make tax stress-free and straightforward.
