What is tax?
Definition of tax
Tax is a sum that has to be paid to the government when a business, or an individual, earns money.
Tax comes in various different forms. For example, limited companies must pay 20% of their profit in Corporation Tax to the government. When individuals go shopping and buy goods, they may have VAT (value added tax) to pay to the retailer, who keeps the VAT that all their customers pay and hands this on to the government.
The government spends funds that it receives from tax on public services, such as building roads and providing state education.
Tracking your business's tax liability
FreeAgent has a Tax Timeline which enables you to see your upcoming dates for Self Assessment, VAT, Corporation Tax and payroll. You can even see how much tax you need to pay.
Disclaimer: The content included in this glossary is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this glossary. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
