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By antonio-ingles
- In Uncategorized
The United Kingdom is one of the most attractive countries to establish a business due to its relatively simple and competitive system of taxes. However, it is essential that you know what each tax is for and how to deal with them to avoid penalties and ensure your business’ success.
In this guide, we will explain in detail how to pay taxes for a business in the United Kingdom.
1. Main Taxes for businesses in the United Kingdom
First of all, it is important to know businesses registered in the United Kingdom are subject to various taxes depending on different aspects such as their size, structure, and commercial activity. Nevertheless, the most important ones to keep in mind are:
- Corporation Tax
- Value Added Tax (VAT)
- Payroll Taxes (PAYE and National Insurance Contributions)
- Dividend Tax
2. Corporation Taxes
Corporation Tax is the tax that businesses pay on their profits. The standard rate in 2025 is 19% for companies with profits up to £50,000 and can go up to 25% for those with profits exceeding £250,000.
How to register the business for Corporation Taxes
Then, after registering your business with Companies House, you must register with HM Revenue & Customs (HMRC) to pay Corporation Tax.
Filing and payment deadlines
- The Company Tax Return must be submitted 12 months after the end of the financial year.
- The tax payment must be made 9 months and 1 day after the end of the financial year.
3. Value Added Taxes (VAT)
VAT in the United Kingdom applies to most goods and services sold by registered businesses. The standard VAT rate is 20%, though there are reduced rates of 5% and 0% for certain products and services.
When must a business register for VAT?
You must register for VAT if:
- Your annual turnover exceeds £90,000.
- You import or export goods within the EU or internationally.
- You want to register voluntarily to reclaim VAT on your purchases.
You can register online through HMRC.
How to file and Pay VAT
- Most businesses file their VAT return every 3 months.
- Payments can be made directly to HMRC in multiple ways, such as direct debit, bank transfer, or credit card.
4. Payroll Taxes (PAYE and National Insurance Contributions)
If your business has employees, you must withhold and pay payroll-related taxes. These include:
- PAYE (Pay As You Earn): The income tax deducted from employees’ salaries.
- National Insurance Contributions (NICs): Social security contributions for both employees and employers.
Registering and paying PAYE and NICs
To manage these taxes, the business must register for PAYE for Employers through HMRC.
What’s more, each month you must submit a Real Time Information (RTI) report with details of employees’ salaries and deductions.
The PAYE and NICs payment must be made:
- By the 22nd of each month if paying via direct debit.
- By the 19th if paying via bank transfer.
5. Dividend Tax
If you are a shareholder in your company and receive dividends, these are also subject to tax.
- The first £500 in dividends is tax-free.
- The dividend tax rates in 2025 are:
- 8.75% for basic-rate income.
- 33.75% for higher-rate income.
- 39.35% for additional-rate income.
Dividends must be reported in the Self-Assessment Tax Return, and payment is made annually to HMRC.
6. Tax payment methods in the United Kingdom
Taxes can be paid in various ways, such as:
- Direct debit
- Bank transfer
- Credit or debit card
- Cheque or postal order
You can find more information through HMRC.
7. Penalties and fines for non-payment of Taxes
Finally, be aware that failing to pay taxes on time can result in fines and surcharges. As a result, some common penalties include:
- Late filing of Corporation Tax: £100 fine if delayed up to 3 months, increasing for longer delays.
- Late VAT payment: Interest and surcharges based on the duration of non-payment.
- PAYE declaration errors: Fines ranging from 1% to 4% of the total amount owed.