Tax Rates for your Business Plan
Tax is an amount of money levied by local or central government on the income of a business. The tax expense shown in the income statement of the financial projections template is based on the income before tax for the year multiplied by the tax rate.
If the business is making losses, it is assumed that these are allowable for tax purposes and they are carried forward against future profits and deducted before calculating the tax expense. No allowance is made for losses carried back against past profits.
How to Obtain the Business Plan Tax Rate
It is not possible to give specific advice as tax rates will vary significantly depending on the country location of your business and such factors as its type, size, the industry in which it is operating, and whether it is incorporated or not.
If you are an established business your current tax rates are the best starting point, otherwise, this list of tax rates by country provides a useful starting point to obtain an estimated tax rate for use in the financial projections template.
However you choose to estimate the financial projections tax rate, the important thing is to get a best estimate and start the financial projections, if at a later stage it is significant to the business plan, then seek tax advice from a professional. Remember this is business planning not accounting.
What’s the Next Step?
The next step in producing a five year financial projection for your business plan using our financial projections template is to estimate the startup expenses needed to get your business of the ground.
This is part of the How to Create Financial Projections Guide a series of posts on how our template is used to produce simple financial projections for a business models.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.