UK Tax & Accounting

Home UK Tax & Accounting

When you establish a place of business in the UK, you will need to ensure your financial systems are fully compliant with legislation.
At St Matthew, we specialise in helping UK businesses owned by overseas companies or overseas entrepreneurs. Our approach is to provide exceptional, reliable and technically sound services to ensure your accounting and tax affairs are properly planned and managed in the most efficient manner.

We can help with ongoing solutions for accounting, payroll and tax compliance for all types of businesses, from sole traders to partnerships and limited companies. There’s no need for you to try to school yourself in the UK’s labyrinthine tax and accounting system when our team of exceptional chartered accountants can do everything for you. We offer peace of mind by ensuring you’re complying with all your tax liabilities.

Below is an overview of the principal taxes that are most relevant to businesses operating in the UK:

Corporation Tax

Corporation tax is levied on the profits of companies registered with Companies House (the UK’s registrar of companies). The tax is for a given twelve-month period and includes money that companies make from doing business, selling assets and investing.

Companies based in the UK pay corporation tax on their profits from the UK and abroad while foreign companies with a UK subsidiary pay the tax on their UK activities. The current corporation tax rate on profits is 19%

Businesses don’t receive a bill for corporation tax. Instead, they prepare and file a company tax return to determine how much they pay.

A corporation tax return, including a self-assessment of the tax, is due within twelve months of the end of the company’s accounting period. For most companies, corporation tax must be paid within nine months and one day of the end of the company’s financial year. Failure to pay the tax liability or missing filing deadlines can result in interest charges and fixed penalties.

VAT (Value Added Tax)

Value added tax is a form of consumption tax charged by VAT-registered businesses on supplies of taxable goods and services to consumers, such as other businesses and individuals. It is charged on things like business sales, commission, selling business assets, business goods used for personal reasons, items sold to staff and hiring or loaning goods to someone.

VAT registration is a requirement for businesses when the VAT taxable turnover for the previous year exceeds £85,000 or if they receive goods from the EU worth more than that amount. It is the VAT-registered businesses’ responsibility to report to HM Revenue and Customs (HMRC) the amount of VAT they’ve charged and the amount of VAT they’ve paid. This is done through a VAT return, which is typically submitted every three months.

VAT-registered businesses can deduct the VAT they have paid on purchases from the VAT they charge their customers. The difference is then paid to the tax authorities.

There are currently three VAT rates in the United Kingdom:

01

Standard Rate

VAT’s standard rate is 20% and applies to most goods and services, including any goods below the distance selling threshold to non-VAT registered European Union (EU) customers. If you go over the threshold, you will have to pay VAT in that country. The standard rate also applies to most services supplied to EU non-business customers.

If you supply services to a business customer in the EU, it is their responsibility to pay VAT in their country.

Therefore you do not need to charge the tax.

02

Reduced Rate

The reduced VAT rate of 5% applies to certain goods and services. Among them are women’s sanitary products, children’s car seats, installation of mobility aids for the elderly, caravans, domestic fuel or power supplies, installation of energy-saving materials, and smoking cessation products.

03

Zero Rate

Goods are still VAT-taxable, but the rate you charge customers is zero. Examples of zero-rated products are children’s clothes and shoes, books and newspapers, most goods exported to non-European Union countries and goods you supply to VAT-registered EU businesses.

Businesses have to record zero-rated VAT goods in their VAT accounts and report them in their VAT returns.

Payroll Taxes

UK subsidiaries with payroll schemes are responsible for collecting payroll taxes (PAYE – Pay As You Earn and National Insurance) from their employees’ salaries.

Income tax – is deducted monthly from an employee’s salary through PAYE. This also applies to non-UK employees who perform their duties in the UK. There are several levels of income tax in the UK. Currently, they stand at:

0%

Up to £12,500

an individual’s personal tax-free allowance

20%

£12,501 to £50,000

basic rate income tax

40%

£50,001 to £150,000

higher rate income tax

45%

Over £150,000

additional rate income tax

National Insurance – this is the UK’s social security scheme. National Insurance contributions (NICs) are paid by employees and employers to help fund state benefits such as the state pension. They are a percentage of the gross salary or wages paid to the employee. It is the employer’s responsibility to calculate the amount due for each employee and to pay it.

The amount employers pay varies depending on the category of employee (such as apprentices under 25, employees under 21 and married women and widows entitled to pay reduced National Insurance) and how much they earn.

Example:

If you have an employee in category A and they earn £1,000 per week you’ll pay:

  • Nothing on the first £169
  • 13.8% on earnings between £169.01 to £962
  • 13.8% on the remaining earnings above £962

Amounts deducted as PAYE and NICs are paid monthly or quarterly to HRMC.

Income Tax

Income tax is payable by sole traders and individual members of a Limited Liability Partnership (LLP) or Limited Partnership (LP).

The tax is payable annually on profits following the filing of a Self Assessment tax return.

Tax is not paid on incomes up to £12,500. After that, the following tax rates apply:

20%

£12,501 to £50,000

basic rate income tax

40%

£50,001 to £150,000

higher rate income tax

45%

Over £150,000

additional rate income tax

Contact

Speak to our team and find out how we can get you up and running in the UK.

Contact us

Contact us by phone:

+ 888 654 4566 22
Contact us