Taxes in the UK, everything you need to know

Thinking about doing business in the United Kingdom? Before you dive in, there’s a crucial topic you need to understand: Taxes in the UK.
Don’t worry; it’s not as complicated as it might seem. This overview is your map to understanding the types of Taxes in the UK and confidently navigating the British tax system.

Understanding the Taxes in the UK for businesses

To begin with taxes in the UK, it’s essential to know about HMRC (Her Majesty’s Revenue and Customs), the UK’s tax authority. They are responsible for collecting taxes and ensuring everyone follows the rules.

Furthermore, acting transparently with HMRC from the outset will save you headaches and is vital for your business’s reputation. The important thing is to be precise with all information regarding taxes in the UK.

Main types of Taxes in the UK you should know

The British system has various types of taxes, but some are crucial for most businesses. Here, we present them to you:

Corporation Tax: A cornerstone of Taxes in the UK

If your business is a limited company, Corporation Tax is fundamental. HMRC calculates this tax on your annual profits.

Currently, the main rate is 25% for profits over £250,000. For profits of £50,000 or less, the rate is 19%. Moreover, for earnings in the intermediate range, the tax rate adjusts progressively, so the increase isn’t too sharp.

Additionally, you should know that you must file a CT600 return with HMRC annually. If you need more information on Corporation Tax, please visit the GOV.UK website on Corporation Tax.

VAT (Value Added Tax)

VAT is a tax on the sale of goods and services. If your company’s taxable turnover exceeds £90,000 annually, you must register to declare VAT.

This means you will add VAT (usually 20%, although there are 5% and 0% rates for certain products) to your prices. Importantly, you can also reclaim VAT on your business purchases. Businesses usually file VAT returns quarterly online, through the Making Tax Digital system.

This is another one of the taxes in the UK that you cannot overlook. You can find all the details on the GOV.UK website on VAT.

National Insurance Contributions (NICs) and their role in UK Taxes

If you have employees, taxes in the UK also include employer National Insurance Contributions (NICs). Businesses pay these on their employees’ salaries that exceed a certain limit, with a main rate around 13.8%. You can use resources like the GoodCalculators to help estimate these.

These contributions fund social benefits and public services such as the National Health Service (NHS). Some companies can benefit from the Employment Allowance, which reduces this burden. Always consult the GOV.UK website on employer NICs for updated figures.

Business Rates: Tax on commercial properties

For companies with physical premises like shops or offices, Business Rates are an important consideration within. Local councils base these rates on the estimated rental value of the commercial property and a multiplier set by the government.

Several types of tax relief are available, especially for small businesses.

Additional tips and considerations for Taxes in the UK

Managing taxes in the UK is simpler with good habits. For example, keeping detailed and up-to-date financial records is a legal and practical imperative.

The personal tax year in the UK runs from April 6th to April 5th. However, your company can set its own accounting year for Corporation Tax. Nevertheless, you must pay attention to deadlines; for instance, businesses usually pay Corporation Tax 9 months and 1 day after the end of the accounting period.

Also, explore the available tax reliefs. The United Kingdom incentivises certain activities, such as investment in R&D or hiring through the Employment Allowance.

To learn more about starting your business venture, take a look at our article benefits of registering a company in the UK.

In summary, although taxes in the UK require attention and knowledge, they are not an insurmountable obstacle. With the right information and professional support, you can meet your obligations and focus on growing your business.

Please do not hesitate to contact us, we will be happy to help you.