Setting up a company in the United Kingdom provides access to one of Europe’s most developed markets. With its investor-friendly legislation, strong entrepreneurial ecosystem, and global connections, the UK is an attractive destination for international entrepreneurs. Even in the post-Brexit era, a free market approach and flexible trade agreements offer various opportunities for foreigners looking to start a business.
Country Overview
- Official Name: United Kingdom of Great Britain and Northern Ireland
- Capital: London
- Population: Approximately 67 million (as of 2024)
- Official Language: English
- Religion: Christianity (mainly Anglican)
- Climate: Temperate maritime climate; rainy and variable throughout the year
- Time Zone: UTC+00:00 (UTC+01:00 during daylight saving time)
- Phone Code: +44
- Currency: British Pound (GBP)
Types of Companies in the United Kingdom
Choosing the right company structure is critical for entrepreneurs who want to start a business in the United Kingdom in terms of legal responsibilities, tax obligations, and growth strategies. Determining the legal structure that best suits your field of activity and goals is the first step to success.
| Company Type | Description |
|---|---|
| Private Limited Company (Ltd) | The most preferred structure by SMEs in the UK. Requires low share capital and at least one director. Shares cannot be offered to the public. The company has legal personality, and shareholders are liable only up to their capital commitments. Registration with Companies House is mandatory. |
| Public Limited Company (PLC) | Suitable for large companies aiming to attract investment or go public. Shares can be traded on the stock exchange. Requires £50,000 minimum capital, at least two directors, and a company secretary. Subject to stricter financial reporting rules. |
| Limited Liability Partnership (LLP) | Ideal for professional services. Formed by at least two partners with limited liability. LLPs are not subject to corporation tax; instead, partners pay income tax on profits. Offers flexibility and protection of personal assets. |
| General Partnership | A simple and low-cost model. Partners are jointly and severally liable for all business debts. Profits are taxed as personal income. Suitable for small businesses based on trust. |
| Limited Partnership (LP) | Includes at least one general partner with unlimited liability and one limited partner liable only up to their investment. Commonly used for passive investment structures like funds. Limited partners cannot participate in management. |
| Sole Trader | The simplest form of business for individuals. Easy to register and no reporting required to Companies House. The owner is personally liable for all business debts. Ideal for freelancers and small entrepreneurs. |
| UK Establishment (Branch or Place of Business) | A cost-effective option for foreign companies to enter the UK market quickly without forming a separate legal entity. Acts as an extension of the parent company. Some financial reporting obligations may still apply. |
Taxation in UK
Value Added Tax – VAT-Sales Tax rate
The standard rate of VAT is 20% with reduced rate of 5 percent applies to some goods and services, eg children’s car seats and home energy.
| Rate Type | VAT Rate | Applicable Areas |
|---|---|---|
| Standard Rate | 20% | Most goods and services |
| Reduced Rate | 5% | Child car seats, home energy |
| Zero Rate | 0% | Essential foods, children’s clothing, and other zero-rated items |
VAT Registration
VAT registration is required if your turnover for the past year has exceeded the £85,000.However you can voluntary register for VAT in the UK. An advantage of voluntary VAT registering is that the company can avoid any late VAT registration penalties if the company exceeds the VAT registration threshold in the future without realising. Therefore it is beneficial to voluntarily VAT register in order to avoid any ongoing concern about exceeding the VAT registration threshold.
Corporation Tax
Corporate tax rate in UK stands at 19%. This type of tax is a tax collected from companies.
| Profit Level | Tax Rate |
|---|---|
| Small profits rate – for profits up to £300,000 | 19% |
| Main rate – for profits over £300,000 | 19% |
When setting up a company in the United Kingdom, it is very important to understand your tax obligations. This is because the type of company you choose will directly affect how your profits are taxed. For specialized support on setting up a company, taxation, and compliance in the United Kingdom, contact us.
