Company formation in UK

Corporate Income Tax

• As of April 2024, the Corporation Tax rate is 25% for companies with profits over £250,000.
• For companies with profits under £50,000, the rate is 19%.
• Companies with profits between £50,000 and £250,000 in the UK will pay a marginal tax rate that gradually increases from 19% to 25%, depending on the exact amount of profit.

Dividend Tax

In the UK, there is no withholding tax on dividends paid to shareholders. However, shareholders must pay tax on the dividends they receive depending on their tax residence.

Value-Added Tax

• The standard VAT rate is 20%. There are also reduced rates of 5% for certain items (like energy-saving products) and 0% for others (like most food and children’s clothes).
• If your business’s taxable turnover exceeds £85,000 in any 12-month period, you must register for VAT and charge it on your sales. You can also register voluntarily if your turnover is below this amount.

Personal Income Tax

If you are a director or employee of a UK company, you will need to pay Personal Income Tax on your earnings as followings:

• The tax rate is 20% on income between £12,571 and £50,270.
• The rate increases to 40% on income between £50,271 and £125,140.
• For income above £125,140, the rate is 45%.
• Everyone has a personal allowance (usually £12,570) that is deducted from their income before the tax rates apply.

Record-Keeping and Reporting Requirements

Every company in the UK must keep detailed financial records and submit regular reports to HM Revenue and Customs (HMRC).

• You must prepare and file annual accounts with both Companies House and HMRC.
• Corporation tax return or CT600, must be filed each year, usually within 12 months after the end of your company’s accounting period.
• If you are VAT-registered company, you must file VAT returns, usually every three months.
• If you employ staff, you need to report payroll information to HMRC each time you pay your employees, through the Pay As You Earn (PAYE) system.