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This page contains an abbreviated summary of the taxes that apply to companies in the UK. This is a simplified abstract for your information and does not replace and in-depth consultancy process. Company Tax
Company tax is payable by limited companies on profits.
Company Tax Rates for 2008/09
Since 1 April 2008, the small companies' rate is 21% and the fraction used in smoothing the difference between the main rate of company tax and the small companies' rate (marginal small companies' relief) is 7/400ths. - Profit up to £300k: 21%
- Profit from £300k to £1,500k: 21% - 28%
- Profit over £1,500k: 28%
Note: The Chancellor announced in his April 2007 budget that the small companies' rate will be increased to 22% in 2009/10. National Insurance
The majority of the working population is required to pay National Insurance contributions (NICs). These contributions go towards certain social security benefits, such as the state pension and jobseekers allowance.
The are different types of NICs: - Primary Class 1 NICs - paid by employed people. An employee only starts paying NICs once they are earning above the earnings threshold. If an employee earns less than the earnings threshold, they are treated as paying NICs on the earnings between the lower earnings limit (LEL) and the earnings threshold. Employees pay NICs at a lower percentage rate on earnings above the upper earnings limit (UEL).
- Secondary Class 1 NICs - paid by employers. An employer pays on the same level of earnings but there is no upper earnings limit (UEL).
NICs rates for employees and employers: - Class 1 NICs (paid by employee): 11% of £105.01 to £770 per week and 1% on all earnings above £770.
- Class 2 NICs (paid by employer): 12.8% of earnings above £105 per week.
Business Rates- As soon as you take out a lease you will need to pay business rates to the local council.
- This is based on the square footage of the area you occupy and varies from council to council.
- A ball park figure is that you will need to pay around £4,000 in business rates a year for an office of 1,000 sqft in Central London. This can be paid in monthly down payments. This is just an example. The actual rates may be lower or higher.
Note: If you subscribe to our Head Office London Service, business rates do not apply. VAT
Value added tax (VAT) is the difference between the value of your sale and your purchase and is payable on the majority of business transactions that involve the transfer of goods or services. VAT is a charge that you normally pass on to your customers. However, it is the supplier of the goods or services who is ultimately liable to pay the tax.
Registration for VAT is required once your business' annual turnover reaches a certain level and VAT will then be payable to HM Revenue & Customs (HMRC). However, even if your turnover has not reached the level required, you may choose to register on a voluntary basis, as this can have benefits for the business.
This threshold is currently £67,000. VAT rates for 2008/09
- Standard - 17.5%
- Reduced - 5%
- Zero rate - 0%
Standard rate 17.5%
VAT is chargeable at 17.5% on most goods and services. This is the standard rate of VAT that is charged unless goods and services are listed under zero rate, reduced rate, exempt or outside the scope of UK VAT. You can find explanations about each of these below. Reduced rate 5%
For goods and services that have a reduced rate of 5% VAT applied please open this page in the FAQ section. Zero-Rated
Zero-rated goods and services are not not exempt rom VAT. You need to charge and account for VAT but at a 0% rate. For a list of items have a look at this page . Exempt form VAT
Some goods and services are exempt from VAT. See our FAQ section for a list. Outside the scope of VAT
For a list of goods and services that are outside the scope of VAT please see this entry in our FAQ section.
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