When and how much tax do I pay in the United Kingdom?

  • 06 Nov 2022

Corporation Tax

  • The Corporation Tax rate in the United Kingdom is 19% for businesses with an annual profit of less than £300,000.

For example, if you incur a total of £2,000 in business expenses and £10,000 in income during your financial year, you would end up paying £1,520 Corporation Tax (10,000 - 2,000 = 8,000 * 0.19).

Year-end dates of companies are variable depending on the date of incorporation. The first financial year ends 12 months after your company’s incorporation date.

After the end of your financial year, you have 9 months for declarations and tax payments.

For example:

o Company incorporation date: 1 June 2022

o First financial year-end date: 30 June 2023

o Declaration and tax payment deadline: 31 March 2024

 

VAT

  • VAT registration in the United Kingdom is voluntary for businesses with sales of less than £85,000 in any 12 months. Although the VAT rate in the UK varies according to the type and location of the product and service, the standard rate is 20%.

For some businesses, it may be advantageous to voluntarily register for VAT before exceeding the turnover limit of £85,000 (For example, if your target audience is UK-based businesses and you are planning to do international trade). Also, some online marketplaces may require VAT registration. Before VAT registration, we highly recommend you consult us first.

VAT declaration is made in quarterly periods and you have 37 days to submit your return and pay your tax bill.

 

 

 

Personal Income Tax

If you are not a UK resident and have never lived in the UK, you do not have to pay personal income tax in the UK (However, it is always good to double-check your circumstances with an expert). There is no personal income tax on the first £12,570 you earn per year. You pay 20% of the amount you earn over that amount. The rate increases if your annual earnings are over £50,000.

The personal tax year is same for everyone and starts on April 6 and ends on April 5 of the following year. The deadline for declaration and tax payment is the 31st of January of the following year.

 

[We would like to state that this information is valid for 2022.]

 

Sources:

https://www.gov.uk/income-tax-rates

https://www.gov.uk/vat-rates

https://www.gov.uk/government/publications/rates-and-allowances-corporation-tax/rates-and-allowances-corporation-tax