Register for tax and claim tax allowances
Understand your tax responsibilities and allowances as a business setting up in the UK.
You must pay Corporation Tax on profits from doing business as a limited company, or as an overseas company with a UK branch or office.
A limited company:
- is legally separate from the people who run it
- has separate finances from your personal ones
- has shares and shareholders
- can keep any profits it makes after paying tax
If your company is based in the UK, you must pay Corporation Tax on all profits from the UK and abroad.
If your company isn’t based in the UK but has an office or branch here, you will only pay Corporation Tax on profits from UK activities.
The government agency responsible for operating the UK tax system is known as HMRC (His Majesty's Revenue and Customs).
Corporation Tax rate
The UK benefits from the lowest Corporation Tax rate in the G7.
The current rate of Corporation Tax is 25% on all profits over £50,000.
If your business makes a profit of £50,000 or less, you’ll pay the ‘small profits rate’, which is 19%.
Taxable profits in the UK
The main elements of taxable profit for Corporation Tax are:
- trading profits
- investment income
- deposit interest
- chargeable gains – this is a UK term for the increase in an asset's value between the time it’s purchased and the time it's sold
Register for Corporation Tax
Your company must register for Corporation Tax within 3 months of commencing trade or becoming active. If you don't do this, you may receive a penalty charge.
When you register your UK company, HMRC will write to your company’s registered UK address, with a unique tax reference (UTR) number and the tax office you’ve been assigned to. You’ll need this to complete your tax registration.
HMRC will also send a form (known as a CT41G) which must be completed to register for Corporation Tax. This can also be done online.
Tax charged on goods and services in the UK
Value Added Tax (VAT) is an amount charged on most goods and services that are purchased in the UK. It is charged by businesses at point of sale. Most goods and services are charged at a standard rate of 20%.
Businesses must register for VAT if their VAT taxable turnover is more than £85,000. If you’re a VAT-registered business, you should:
- include VAT in the price of all goods and services
- keep records of how much VAT you pay for things you buy for your business
- account for VAT on any goods you import into the UK
- report the amount of VAT you charged your customers and the amount of VAT you paid to other businesses by sending a VAT return to HM Revenue and Customs (HMRC)
Tax allowances available to UK companies
The UK has a variety of allowances which give companies tax relief on their expenditure.
You can claim capital allowances if you buy assets that you keep to use in your business, for example:
- business vehicles, such as cars, vans, and lorries
You can also claim tax allowances for business costs and a variety of other reasons, including renovation of business premises in some parts of the UK, and research and development.
Find out how to claim capital allowances on GOV.UK
Incentives and support
The UK offers attractive venture capital schemes to help small and medium enterprises expand. There’s also a variety of incentives and support available, with several related to innovation and research.
For advice on your business and to find a specialist in UK tax, you can search the Investment Support Directory for a list of lawyers and accountants.