How to Pay Taxes in a Company Registered in the UK

Registering a company in the UK offers numerous advantages, including easy incorporation, operational flexibility, and a competitive tax environment. And it is essential to understand how to pay taxes in a company registered correctly to ensure legal compliance and optimize your tax burden.

Below, we explain in a clear and simple way how to manage taxes for a company registered in the UK.

1. Corporation Tax

Every company registered in the UK must pay Corporation Tax on its profits. The current standard rate is 25% for businesses with profits over £250,000, although reduced rates apply to small companies.

To comply with this tax, you must:

• Register your company with HM Revenue and Customs (HMRC) within three months of starting business activities.
• Submit an annual Company Tax Return detailing your income, expenses, and profits.
• Pay the Corporation Tax within 9 months and 1 day after the end of the accounting period.

2. Value Added Tax (VAT)

If your business turnover exceeds £90,000 per year (threshold for 2024–2025), you must register for VAT. Then once registered, you are required to:

• Add VAT to your invoices.
• Submit VAT returns periodically (usually quarterly).
• Pay HMRC the difference between the VAT you charge your clients and the VAT you pay to your suppliers.

Even if your turnover is below the threshold, voluntary VAT registration can offer benefits, such as improving your company’s credibility.

3. Payroll Taxes (PAYE)

If your UK-registered company has employees (including directors who are paid a salary), you must operate a PAYE (Pay As You Earn) system. Through PAYE:

• Income tax and National Insurance contributions are deducted from employee wages.
• These payments are sent to HMRC on time, usually monthly.

Managing PAYE correctly is crucial to avoid fines and penalties.

4. Dividends and Their Taxation

Company directors and shareholders can receive profits via dividends, which have a different tax treatment than regular salaries:

• There is a £500 tax-free dividend allowance (as of now).
• Dividends above this threshold are taxed at reduced rates compared to income tax.

Properly reporting dividends allows you to take advantage of tax savings and maximize your net income.

5. Annual Filings and Accounting Requirements

All UK-registered companies must submit:

• Annual accounts to Companies House.
• A Company Tax Return (CT600) to HMRC.

Accuracy and timeliness in these filings are essential to avoid high penalties. Additionally, keeping your accounts organized helps ensure full compliance with all tax obligations.

6. Tax Benefits and Optimization

The UK tax system offers various opportunities for optimization:

• Deductions for legitimate business expenses (e.g., marketing, software, business travel).
• R&D tax credits for companies involved in innovation.
• Corporate pension schemes with tax benefits.

Working with a specialist tax advisor can help you identify all eligible deductions and optimize your company’s profitability in the UK.

7. Tips for Managing Business Taxes Effectively

• Keep detailed and up-to-date accounting records.
• Use HMRC-compliant accounting software (e.g., Xero, QuickBooks, or FreeAgent).
• Regularly consult with a certified accountant to stay current with UK tax regulations.
• Submit all returns on time to avoid late fees or penalties.

Staying Compliant Strengthens Your Business in the UK

If you pay taxes in a company registered in the UK correctly, not only avoids legal issues but also strengthens your business’s reputation and trustworthiness. Understanding tax types, deadlines, and optimization opportunities is crucial for succeeding in one of the world’s most robust and respected markets.

If you need expert support in managing your company’s taxes in the UK, UKStartCompany is here to help you meet your tax obligations simply and effectively.