Updated last year

The United Kingdom is historically known as ‘the nation of shopkeepers’ because of its long-standing entrepreneurial flare which has actively contributed to the country’s commercial profile.

To nurture the UK entrepreneur market and to encourage citizens to set up their businesses, the UK government has allowed for the setting up a business process to be straightforward and hassle-free.

As an expat, you can set up your own business in the UK if you are a citizen of the EU, EEA or have a Tier 1 (Entrepreneur) Visa.

Register your company in the UK

To declare your business and ensure you are paying taxes on your earnings, each business must register with HM Revenue and Customs (HMRC). Once you receive confirmation and your unique tax number, HMRC requires all companies to pay a yearly tax sum, starting from April of the precedent tax year and depending on how much you earn and what type of company you own.

If you wish to seek more advice you can contact HM Revenue and Customs or your Local Council directly, you can also contact the Chamber of Commerce in your UK city of residence or your home country if you are not yet living in the UK.

Business types in the UK

There are various types of business structures in the United Kingdom, picking the right one to start your company, depends on your unique situation; the two main types are:

Sole trader

If you have started working for yourself and earned money through your business activities, you are classed as self-employed and are a sole trader, even if you have not yet registered with HM Revenue and Customs.

Your responsibilities include:

  • Keep records of your business’ sales and expenses (e.g. invoices and receipts)
  • Carry out a self-assessment tax return every year
  • Pay Income Tax on your profits and Class 2 and Class 4 National Insurance - use HMRC’s calculator to help you budget for this

A sole trader does not own a V.A.T (tax) company if your company earnt more than £83,000 in the previous tax year you must register as a V.A.T company.

Taxable income is 20% when under £32,000 and 40% when more than £32,000.

 Good to know: You only start paying tax after you have earnt over £11,500 in that financial year.

V.A.T company in the UK

Once you earn more than £83,000 a year, you must register as a V.A.T company (i.e. apply for its legal identity) and start charging the correct amount of V.A.T for your work, unless what you sell is exempt. You cannot charge V.AT on your invoices until you receive your tax number from HM Revenue and Customs.

For Limited (V.A.T) Companies tax is at 20%.

Your responsibilities include:

  • Keep company records and report changes to Companies House and HMRC
  • File your accounts with Companies House and your Company Tax Return with HMRC
  • Pay Corporation Tax
  • Register for Self Assessment and send a personal Self Assessment tax return every year - unless it is a non-profit organisation (e.g. a charity) and you did not get any pay or benefits, like a company car

How to run a business in the UK

It is important to hire an accountant for your business, who can help you not only declare your funds each year and follow all current and updated tax laws but also save you money in the long term by advising on your rights and eventually reducing your tax bill.

 Good to know: You can claim for any expenses that relate to your business, which reduces your taxable income.

Local Council and the chamber of commerce can also advise you on any financial support, and mentoring programs the UK can offer to your specific project. Many grants and bursaries are available in the UK, depending where you are setting up your business (some areas have low entrepreneur level which they want to raise), what your business sells, and who you are (e.g. minority group, young people, financial background, victims of crimes, etc.).

 Useful links:

Setting up a business www.gov.uk/set-up-business
Registering V.A.T company www.companieshouse.gov.uk
List of global locations www.britishchambers.org.uk
Find a council near you www.gov.uk/council
Types of grants and funding www.gov.uk/business
Information on work permits www.workpermit.com

We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.