Business in the UK: Everything You Need to Know

The United Kingdom is one of the most attractive destinations for entrepreneurs and any kind business.

Thus, with a clear legal system, competitive taxes, and a favourable business environment, setting up a company in the United Kingdom can be a great decision.

However, before starting the process, it is essential to understand the requirements, types of businesses and tax obligations.

In this guide, we explain everything you need to know about registering and managing a business in the United Kingdom.

Types of business in the United Kingdom

First, before registering your company, it is crucial to choose the most suitable legal structure. In the UK, the main types of businesses are:

Sole Trader: An individual business where the owner has unlimited liability. It is the simplest option with minimal requirements.
Limited Company (LTD): A separate legal entity with limited liability for shareholders. This is the most popular choice for startups and growing businesses.
Partnership: Similar to a sole trader, but with more than one owner. It can be a General Partnership (GP) or a Limited Liability Partnership (LLP).

How to register a Business in the UK

The registration process is simple and is done through Companies House, the government body responsible for managing businesses in the United Kingdom.

Steps to register a Limited Company (LTD)

Choose a unique company name (not already registered).
Define a business address in the UK.
Appoint at least one director and shareholders.
Prepare the Memorandum and Articles of Association.
Register the company with Companies House online.
Obtain a Company Registration Number (CRN).
Register the company for Corporation Tax with HMRC.

The registration fee is £12 if done online, and the process is typically completed within 24 hours.

Taxes and accounting obligations

Businesses in the United Kingdom have several tax obligations. The most important ones are:

Corporation Tax: 19% or 25% on profits, payable 9 months and 1 day after the financial year ends.
Value Added Tax (VAT): Mandatory if your turnover exceeds £90,000 per year. The standard rate is 20%.
Pay As You Earn (PAYE) and National Insurance Contributions (NICs): If you have employees, you must withhold income tax and social security contributions.
Self-Assessment Tax Return: If you are a director or sole trader, you must file an annual tax return.

Benefits of having a Business in the UK

Fast and easy registration: Setting up a business can take less than 24 hours.
Competitive taxes: The Corporation Tax rate is lower than in many European countries.
Access to financing: London is a global financial hub with numerous investment and loan opportunities for businesses.
Ease of international trade: The United Kingdom has trade agreements with many countries, making global expansion easier.
Transparent legal framework: Business regulations are clear and protect entrepreneurs.

Business bank accounts and payment methods

Opening a business bank account in the UK is essential for managing income and expenses efficiently.

Popular options include:

Traditional banks: Barclays, HSBC, Lloyds, NatWest.
Digital banks: Revolut, Monzo, Starling Bank, Tide.

To open a bank account, you need the following requirements:

Certificate of Incorporation.
Director’s identification and proof of address.
Details of shareholders and company structure.

You can also use payment platforms like PayPal, Stripe, or Wise for international transactions.

Operating costs and accounting

The cost of running a business in the United Kingdom varies, but some essential expenses include:

Company registration with Companies House: £12 (online).
Business bank account: Free with digital banks, but up to £25/month with traditional banks.
Accountant fees: £50 to £200/month, depending on services.
Accounting software: Xero, QuickBooks, or FreeAgent, costing £10 to £30/month.

Hiring employees and social security

If you plan to hire employees, you must:

Register the company as an employer with HMRC.
Implement PAYE to deduct income tax and National Insurance.
Comply with the United Kingdom minimum wage regulations.
Provide a mandatory pension scheme for employees.

Employment in the United Kingdom is highly regulated and offers protections for both employees and employers.