Introduction
The United Kingdom is one of the world's most welcoming destinations for international investment. With a domestic market of approximately 68 million people and strong links to Europe, North America, Asia and beyond, the UK offers exceptional reach for businesses seeking global growth.
The UK has established itself as a global hub for finance, technology, life sciences and professional services, underpinned by a competitive tax regime, a stable legal framework and the relative ease of establishing a new business entity. A limited company can typically be incorporated within 48 hours.
AccounTX provides a one-stop service for inward investors, handling the administrative, regulatory and tax requirements that allow your management team to focus on running and growing the business. This guide provides a comprehensive overview of the key considerations; it should, however, be read alongside personalised advice from our team.
Tax rates and thresholds in this guide reflect the position for the 2025/26 tax year unless otherwise stated. Please contact AccounTX for the latest figures.
Choosing the Right Trading Entity
There are several business structures available in the UK, each with distinct advantages and obligations. The most appropriate choice depends on factors such as liability, tax efficiency, governance, and the profile of information you wish to place on the public record.
UK Branch (Permanent Establishment)
A UK branch is an extension of an overseas company and is not a separate legal entity. Contractual obligations and liabilities of the branch are obligations of the overseas parent. A branch must have a UK trading address and must be registered at Companies House within one month of establishment. The current registration fee for a UK establishment of an overseas company is £124 (paper filing).
Although the branch's own accounts need not be filed at Companies House, the overseas parent's accounts must be filed annually in English. If commercial confidentiality is a priority, a limited company structure may be preferable.
A UK permanent establishment can be wound down more quickly than a limited company, but third parties often perceive a limited company as more permanent and creditworthy.
Private Company Limited by Shares (Ltd)
A limited company is a separate legal entity. It may be standalone (owned by individuals) or a subsidiary of an overseas parent. The liability of shareholders to outside creditors is generally limited to the value of assets and issued share capital.
The minimum requirement is one shareholder and one natural person as director. There is no requirement to trade, but a UK-registered office address is mandatory. A company is registered in England and Wales, Scotland, or Northern Ireland; the registered office must be in the same jurisdiction. AccounTX can provide a registered office address in England and Wales.
Incorporation can be completed online within 48 hours. The current digital incorporation fee at Companies House is £100 (as at February 2026). Annual financial statements must be filed at Companies House within nine months of the financial year-end (or 21 months from incorporation for the first period).
A statutory audit is required where two of the following three thresholds are exceeded (usually in the second consecutive year of breach):
| Audit Threshold Criterion | Limit |
|---|---|
| Turnover | Exceeds £10.2 million |
| Gross assets | Exceeds £5.1 million |
| Employees | More than 50 |
Audit is also required if the company is a PLC, or is in a group containing a PLC or regulated entity, or if shareholders holding at least 10% of shares request one.
Public Limited Company (PLC)
A PLC operates similarly to a private limited company but must have a minimum of £50,000 share capital (of which at least 25% must be called up and paid). A company secretary is mandatory, and a trading certificate must be obtained before trading commences. Annual accounts must be filed within six months of the financial year-end. All PLCs require an annual audit.
Limited Liability Partnership (LLP)
An LLP combines limited liability with the tax transparency of a partnership. Members are treated as self-employed for tax purposes and pay Income Tax on their share of profits. Annual financial statements must be filed at Companies House. An LLP must have at least two members at all times, of whom at least two must be designated members with additional compliance responsibilities. The digital incorporation fee is £100 (as at February 2026).
LLPs are commonly used by professional firms (solicitors, accountants), joint ventures and financial services businesses.
Partnership
A partnership exists where two or more persons (individuals or companies) carry on a business together with a view to profit. Partners share responsibility for business losses and liabilities, including any shortfall from an insolvent partner. Profits are allocated on the partnership tax return; each individual partner then pays Income Tax, Class 2 and Class 4 National Insurance on their share.
A nominated partner is responsible for submitting the partnership tax return and maintaining business records.
Sole Trader
A sole trader runs a business as an individual and bears unlimited personal liability for business debts. Registration with HMRC is required. Key obligations include:
- Annual Self Assessment tax return
- Income Tax on profits and Class 2 / Class 4 National Insurance Contributions
- Unlimited personal liability for all business debts
Sole trader status is popular with consultants and freelancers owing to minimal filing obligations. However, some businesses require contractors to operate through a limited company. The off-payroll working (IR35) rules must also be considered, as they can deem certain workers to be employees of their end client.
IR35 compliance is a complex area. AccounTX can advise on your specific arrangements.
Audit Requirements
A UK limited company is generally exempt from statutory audit unless:
- Two of the three size thresholds above are exceeded
- It is a public limited company (PLC)
- It is part of a group that exceeds the consolidated thresholds
- Shareholders holding at least 10% of shares request an audit
Auditors report on whether the financial statements give a true and fair view, comply with UK accounting standards and the Companies Act 2006. An audit can also be valuable when selling a business or seeking external finance. AccounTX works with qualified audit firms and can make appropriate introductions.
The Corporate Tax Regime
A company falls within the scope of UK Corporation Tax if it is a UK tax resident or has a UK permanent establishment.
UK Tax Residence
A company is UK tax resident if it is incorporated in the UK or if its central management and control is exercised in the UK. A UK tax resident company is subject to Corporation Tax on its worldwide profits.
Permanent Establishment (PE)
A non-resident company is subject to UK Corporation Tax on profits attributable to a UK permanent establishment. A PE arises if the company has a fixed place of business through which it trades, or if an agent habitually exercises authority to conclude contracts on its behalf.
Corporation Tax Rates (2025/26)
| Rate | Amount |
|---|---|
| Main rate (for profit above £250,000) | 25% |
| Small profits rate (profits below £50,000) | 19% |
| Marginal relief band | £50,001 – £250,000 |
Thresholds are proportionately reduced for short accounting periods and divided by the number of associated companies (broadly, companies under common control including overseas entities).
Key Tax Adjustments
The starting point for the tax computation is the accounting profit or loss before tax. Common adjustments include the following.
UK Dividend Exemption
Most dividends received by a UK company are exempt from Corporation Tax, subject to qualifying conditions.
Substantial Shareholding Exemption (SSE)
Gains on disposals of shares in trading companies are exempt from Corporation Tax where certain conditions are met, including a minimum 10% shareholding held for at least 12 months.
Capital Allowances
Depreciation is not deductible for Corporation Tax purposes. The UK operates a generous capital allowances regime, including a 100% Annual Investment Allowance for qualifying plant and machinery (subject to an annual limit). Full expensing is available for qualifying expenditure from 1 April 2023.
Research & Development (R&D) Tax Relief
Companies conducting qualifying R&D may claim enhanced deductions or, from April 2024, relief under the merged R&D Expenditure Credit (RDEC) scheme at a rate of 20%. Loss-making companies can surrender qualifying losses for a cash credit. The R&D intensive SME scheme provides enhanced support for qualifying small companies. The rules were significantly reformed in April 2024.
R&D claims now require advance notification to HMRC for first-time claimants and companies with a gap in claims. AccounTX can manage the entire process.
Patent Box
The Patent Box regime applies a reduced Corporation Tax rate of 10% to profits derived from qualifying patents and intellectual property rights, incentivising innovation and the commercialisation of patented technology in the UK.
Creative Industries Relief
The UK provides specific tax reliefs for creative industries, all of which are being transitioned to Audio-Visual Expenditure Credits (AVEC) and Video Games Expenditure Credit (VGEC) from January 2024. These cover:
- Film and High-end Television
- Animation and Video Games
- Theatre, Orchestra, Museums and Galleries
Interest and Financing Costs
Interest deductions are restricted by the Corporate Interest Restriction (CIR) rules for groups with aggregate UK net interest expense above £2 million. Deductions are capped at the lower of 30% of tax-EBITDA (fixed ratio rule) and the group's own ratio of interest to EBITDA (group ratio rule).
Loss Relief
UK trading losses may be carried back one year (or three years under terminal loss relief), carried forward indefinitely, or surrendered to other UK group companies. Once carried-forward losses exceed the £5 million deduction allowance, they can only offset up to 50% of remaining profits.
Double Tax Relief
The UK has one of the world's most extensive double tax treaty networks (covering over 130 countries). Where income has been taxed overseas, relief is available either as a credit or, in certain circumstances, as a deduction.
Reporting and Paying Corporation Tax
Company Tax Returns must be filed electronically with iXBRL-tagged accounts within 12 months of the end of the accounting period. Payment deadlines depend on the company's size:
| Category | Profit Threshold | Payment Timing |
|---|---|---|
| Small companies | Profits up to £1.5m | 9 months and 1 day after the period end |
| Large companies | £1.5m – £20m | Quarterly instalments from 6 months 14 days into the period |
| Very large companies | Over £20m | Quarterly instalments from 2 months 14 days into the period |
A large company transitioning into the instalment regime for the first time receives a one-year grace period where profits do not exceed £10 million.
Employment Tax (PAYE)
Every business employing staff in the UK must register for Pay As You Earn (PAYE). HMRC uses this system to collect Income Tax and National Insurance Contributions (NICs) from both employees and employers. PAYE must be reported in real time via Full Payment Submissions (FPS) each time employees are paid.
Income Tax (2025/26)
Income Tax is deducted from employees' earnings at source. Current rates and bands (England, Wales and Northern Ireland):
| Band | 2025/26 Threshold |
|---|---|
| Personal allowance | £12,570 (tapered where income exceeds £100,000) |
| Basic rate – 20% | £12,571 – £50,270 |
| Higher rate – 40% | £50,271 – £125,140 |
| Additional rate – 45% | Over £125,140 |
Scottish Income Tax rates differ. Employees resident in Scotland are subject to Scottish rates set by the Scottish Parliament.
Dividend Tax (2025/26)
| Band | Rate |
|---|---|
| Dividend allowance | £500 |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Class 1 National Insurance Contributions (2025/26)
Employee NICs (unchanged from 2024/25):
| Employee Earnings Band | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 8% |
| Over £50,270 | 2% |
Employer NICs (changed from April 2025 per the Autumn Budget 2024):
| Employer Measure | Rate / Limit |
|---|---|
| Up to £5,000 per employee | 0% |
| Over £5,000 per employee | 15% |
| Employer NICs on benefits (Class 1A) | 15% |
| Employment Allowance (eligible employers) | Up to £10,500 per year |
Employer NIC rates increased from 13.8% to 15% and the secondary threshold was reduced from £9,100 to £5,000 per employee per year from 6 April 2025. The Employment Allowance simultaneously increased from £5,000 to £10,500 and the £100,000 eligibility cap was removed.
Self-Employed NICs (2025/26)
| Class | Rate |
|---|---|
| Class 2 (above small profits threshold of £6,845) | £3.50 per week |
| Class 4 on profits £12,570 – £50,270 | 6% |
| Class 4 on profits over £50,270 | 2% |
NIC Exemptions for Seconded Employees
Employees seconded to the UK from countries with which the UK has a social security agreement may be exempt from both employee and employer NICs for a limited period (usually up to five years). Countries currently covered include:
- Barbados, Bermuda, Canada, Chile, Isle of Man, Israel, Jamaica, Japan, Jersey & Guernsey
- Mauritius, New Zealand, Philippines, South Korea, Turkey, USA
- Republic of Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia
A formal certificate of exemption must be obtained in each case. Employees seconded from countries outside these agreements may be eligible for up to 52 weeks' NIC exemption subject to certain conditions. AccounTX can manage this process on your behalf.
Workplace Pensions (Auto-Enrolment)
All employers must auto-enrol eligible UK workers into a qualifying workplace pension scheme, regardless of the employer's country of origin. Eligible workers are those aged 22 to state pension age (currently 66) earning over £10,000 per year.
Minimum total contributions must equal at least 8% of qualifying earnings (between £6,240 and £50,270 for 2025/26), with the employer responsible for at least 3%. AccounTX can assist with pension scheme setup and introduce you to regulated pension specialists.
Value Added Tax (VAT)
The UK imposes VAT on most business-to-business and business-to-consumer transactions. The current standard rate is 20%.
Registration Thresholds (2025/26)
| Threshold | Amount |
|---|---|
| Registration threshold (UK-established businesses) | £90,000 (rolling 12 months) |
| Deregistration threshold | £88,000 |
| Registration threshold (non-UK established businesses) | Nil – registration required on the first taxable supply |
The VAT registration threshold increased from £85,000 to £90,000 on 1 April 2024. Overseas companies making any taxable supply in the UK must register immediately, regardless of turnover.
VAT Rates
| Category | Rate |
|---|---|
| Standard rate | 20% |
| Reduced rate (e.g. domestic fuel and power, certain renovation works) | 5% |
| Zero rate (e.g. most food, books, children's clothing, exports) | 0% |
| Exempt supplies (e.g. land, insurance, finance, education, health) | N/A – no VAT charged or recoverable |
Filing VAT Returns
Most businesses file quarterly VAT returns, due within one month and seven days of the end of each quarter. All VAT-registered businesses must file under Making Tax Digital (MTD) using compatible software. Monthly returns are available for businesses expecting regular repayments. Annual accounting and cash accounting schemes are available for smaller businesses.
Businesses importing goods into Northern Ireland from the EU must complete Intrastat returns where EU arrivals exceed £500,000 or dispatches exceed £250,000.
Withholding Taxes
Certain payments require a company to withhold tax and account for it to HMRC. There is generally no withholding tax obligation on dividends (except for property income dividends paid by Real Estate Investment Trusts).
Interest
Withholding tax at 20% applies to UK-source interest payments, subject to exceptions including:
- 'Short' interest on loans of less than one year's duration
- Interest paid between UK resident companies or to/from a UK permanent establishment
- Interest paid to or by a UK bank or UK PE of a foreign bank
- Interest on quoted Eurobonds
- Interest on private placement debt of UK companies
- Eligible payments by a Qualifying Asset Holding Company (QAHC)
If no exemption applies, withholding tax must be deducted unless HMRC has authorised gross payment or a double tax treaty reduces or eliminates the obligation.
Royalties
Withholding tax at 20% applies to UK-source royalty payments (patents, copyrights, trademarks, know-how, etc.). Exemptions or reduced rates may be available where the recipient is a UK resident, carries on trade through a UK PE, or where a double tax treaty applies. Unlike interest, treaty relief on royalties can be applied without prior HMRC authorisation where the payer reasonably believes relief is available.
Reporting
CT61 quarterly returns must be submitted to HMRC for interest and royalty payments subject to withholding tax.
Employment Matters and Personal Taxation
National Minimum Wage and National Living Wage (from 1 April 2025)
| Worker Category | Hourly Rate |
|---|---|
| National Living Wage (aged 21 and over) | £12.21 per hour |
| Aged 18 to 20 | £10.00 per hour |
| Aged 16 to 17 | £7.55 per hour |
| Apprentices (under 19, or aged 19+ in first year) | £7.55 per hour |
From 1 April 2026, the National Living Wage is set to increase to £12.71 per hour, subject to formal confirmation. The government has signalled its intention to align the under-21 rates with the NLW over time.
Working Time
The Working Time Regulations limit average working hours to 48 per week, though workers may opt out individually. Workers are entitled to a minimum of 28 days' paid annual leave (inclusive of eight UK public holidays). Most employers provide between four and six weeks.
Work Permits and Visas
Most non-UK nationals require a visa and, where applicable, a work permit to take up employment in the UK. The Skilled Worker visa is the main route for overseas employees. Certain individuals do not require a work permit:
- Irish citizens
- Those born in Gibraltar
- Commonwealth citizens with a grandparent born in the UK
- Dependants of work permit holders
Post-Brexit immigration rules apply to EEA nationals as well as non-EEA nationals. Early planning and specialist immigration advice is recommended.
Inheritance Tax (IHT)
IHT is levied at 40% on the worldwide estate of persons who are domiciled (or deemed domiciled) in the UK at death, after a nil-rate band of £325,000. Business Property Relief at 100% is available for qualifying business assets, encouraging entrepreneurship. A residence nil-rate band of up to £175,000 may also be available on the family home.
Non-domiciled individuals who have been UK resident for fewer than 10 of the previous 20 tax years (the rules changed from 6 April 2025) are generally subject to IHT on UK situs assets only.
The IHT treatment of non-domiciled individuals changed significantly from April 2025. AccounTX recommends taking specific advice if this may apply to you or your business owners.
Personal Taxation
An individual's UK tax liability depends on both residency and domicile. UK residents who are also domiciled in the UK pay UK tax on worldwide income and gains. The Statutory Residence Test (SRT) determines residence. Key considerations for internationally mobile individuals include split-year treatment, the remittance basis of taxation for non-domiciles (note: the remittance basis regime is being phased out and replaced with a 4-year Foreign Income and Gains (FIG) regime from April 2025), and treaty tie-breaker provisions.
Share Option Schemes
The UK offers several HMRC-approved share incentive arrangements that provide significant tax advantages for employees and employers. Professional advice should be sought before establishing a plan or granting options.
| Scheme | Key Features | Eligibility |
|---|---|---|
| EMI | Options up to £250,000 per employee; exercisable within 10 years; discount available on grant | Company gross assets <£30m; <250 FTE employees; total options ≤£3m |
| CSOP | Options up to £60,000 per employee at market value; exercisable 3–10 years from grant | Excludes holders of >30% of share capital |
| SIP | Up to £3,600 free shares; employees may buy up to £1,800 partnership shares tax-free; matching shares available | Same terms must apply to all eligible employees |
| Phantom Share Plan | Cash bonus based on share value growth; no actual shares granted | Company discretion on recipients |
| Unapproved Option Scheme | Options at discount; exercisable at any time; Income Tax and NIC on exercise | Company discretion |
| SAYE (Sharesave) | Save £5–£500/month for 3 or 5 years; use savings to buy shares at up to 20% discount | Same terms for all participants |
The CSOP option limit doubled from £30,000 to £60,000 per employee from 6 April 2023. Enterprise Management Incentive (EMI) options remain the most flexible and tax-efficient vehicle for qualifying companies.
Banking Arrangements
Opening a UK bank account is one of the first practical steps after incorporation. The UK banking sector is well developed and competitive. Banks will typically require Know Your Customer (KYC) documentation including certified identity documents for directors and beneficial owners, and proof of address.
AccounTX maintains relationships with a range of UK banks that specialise in serving internationally connected businesses. We can facilitate introductions to appropriate banking contacts.
Anti-Money Laundering (AML) Regulations
The UK imposes strict anti-money laundering obligations on financial institutions, accountants and other regulated professionals. When engaging AccounTX or any other regulated professional, you will be required to provide:
- Certified copies of identity documents (passport or national identity card) for all directors, significant shareholders and beneficial owners
- Proof of address (bank statement or utility bill dated within the last three months)
- Source of funds documentation where required
From 18 November 2025, Companies House requires identity verification for all new directors, people with significant control (PSCs) and LLP members. Existing officeholders must complete identity verification by 18 November 2026.
AccounTX can assist in collating and certifying the required documentation to meet both Companies House and regulated professional requirements.
Appendices
Schedule 1 – Income Tax Rates 2025/26
England, Wales and Northern Ireland:
| Band | Threshold |
|---|---|
| Personal allowance | £12,570 |
| Basic rate – 20% | £12,571 – £50,270 |
| Higher rate – 40% | £50,271 – £125,140 |
| Additional rate – 45% | Over £125,140 |
The personal allowance is reduced by £1 for every £2 of income over £100,000, reaching nil at £125,140.
Schedule 2 – Dividend Tax Rates 2025/26
| Band | Rate |
|---|---|
| Dividend allowance (0%) | £500 |
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Schedule 3 – National Insurance Rates 2025/26
Employee Class 1:
| Earnings Band | Rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 – £50,270 | 8% |
| Over £50,270 | 2% |
Employer Class 1 (from 6 April 2025):
| Measure | Rate / Limit |
|---|---|
| Up to £5,000 per employee | 0% |
| Over £5,000 per employee | 15% |
| Employment Allowance | Up to £10,500 |
Self-Employed:
| Class | Rate |
|---|---|
| Class 2 (above £6,845 small profits threshold) | £3.50 per week |
| Class 4 on profits £12,570 – £50,270 | 6% |
| Class 4 on profits over £50,270 | 2% |
Schedule 4 – VAT Rates and Thresholds 2025/26
| Category | Rate / Amount |
|---|---|
| Standard rate | 20% |
| Reduced rate | 5% |
| Zero rate | 0% |
| Registration threshold (UK-established) | £90,000 |
| Deregistration threshold | £88,000 |
| Overseas business threshold | Nil |
Schedule 5 – National Minimum Wage Rates (from 1 April 2025)
| Category | Rate |
|---|---|
| National Living Wage (aged 21+) | £12.21 per hour |
| Aged 18 to 20 | £10.00 per hour |
| Aged 16 to 17 | £7.55 per hour |
| Apprentice rate | £7.55 per hour |
Schedule 6 – Companies House Filing Requirements
Limited Companies and LLPs
Documents required on incorporation (digital filing):
- Memorandum of Association
- Articles of Association
- Form IN01 (limited company) or Form LLIN01 (LLP)
- Digital incorporation fee: £100 (from February 2026)
Ongoing obligations:
- Annual confirmation statement (digital fee: £50 from February 2026)
- Annual financial statements filed at Companies House
- Notification of changes to directors, PSCs, registered office, share capital
- Identity verification for directors and PSCs (mandatory from November 2025 for new appointees)
UK Branch (Overseas Company)
Within one month of establishing a UK branch, the following must be filed at Companies House:
- Form OSIN01
- Certified copy of the overseas company's constitutional documents (with certified English translation if required)
- Copy of the latest accounts of the overseas company
- Registration fee: £124 (paper, from February 2026)
Overseas company accounts must be filed at Companies House annually. Where accounts are publicly disclosed in the home country, a copy (with certified translation) must be filed within three months of public disclosure. Where no home country disclosure is required, accounts prepared under the Overseas Companies Regulations 2009 must be filed within 13 months of the accounting reference date.
Closing a Limited Company
A company that has not traded or changed its name in the previous three months and has no outstanding liabilities may be voluntarily struck off using Form DS01 (digital fee: £13 from February 2026). Where liabilities exist, an insolvency practitioner should be engaged. AccounTX can advise on the most efficient closure method and the tax implications.
About AccounTX
Based in India, AccounTX has extensive experience in supporting businesses and individuals through the process of establishing and operating in the UK. We understand that setting up in a new jurisdiction can appear daunting: the regulatory framework, tax obligations, banking requirements and compliance deadlines are all unfamiliar. Our role is to make this straightforward.
Our Partners develop close working relationships with each client, building a detailed understanding of the business and its goals. They act as your principal point of contact in the UK and coordinate across legal, banking, payroll, audit and tax disciplines so that you receive comprehensive, joined-up advice.
We work with a network of specialists across many fields, ensuring that our clients receive expert guidance at every stage — from pre-arrival planning and entity incorporation, through to ongoing compliance, tax filing and strategic advisory.
Rapid globalisation and the growth of digital commerce have lowered the barriers to international expansion. The UK's extensive double tax treaty network (over 130 treaties), world-class professional services sector and transparent legal system make it an excellent base from which to access European, US and global markets.
Contact AccounTX
+91 75039 85039 | growth@accountx.in | www.accountx.in
This guide is provided for general information only and does not constitute legal, tax or financial advice. Readers should seek professional advice in relation to their specific circumstances. AccounTX accepts no liability for actions taken in reliance on the contents of this guide without prior consultation.