UK tax essentials

Millennium Bridge and St Pauls Cathedral
With tax incentives and low corporation tax, the UK is a very affordable place to do business. Here’s an overview of what you need to know.

The essentials

UK Corporation Tax
Corporation Tax is the tax levied on a company’s profits. The current rate is 19%  one of the lowest in the G20.

UK Income Tax
Income Tax (and national insurance) is generally deducted from an employee’s salary on a monthly basis, through an employer-run system known as “Pay As You Earn” (PAYE).

National Insurance Contributions (NICs)
NICs is the UK’s social security mechanism. Both employers and employees are subject to NICs as a percentage of the gross salary paid to an employee.

With the right advice from London & Partners, with tax incentives and low corporation tax, the UK is a very affordable place to do business.
Brit Services Technology

Value Added Tax (VAT)

VAT is consumption tax on goods and services in the UK. The standard rate is currently 20% and is applied to most taxable goods or services. A reduced rate (5%) or a rate of 0% can apply.

You may also be charged UK VAT on goods and services that are supplied to you, but if you are a UK VAT registered business you can recover these payments by paying (or reclaiming) the net amount via your next VAT return.

Get help with UK tax

Contact us for more information on tax requirements and incentives.

Tax incentives

Research and development (R&D) tax credits

R&D can be costly, but the UK has some of the most effective tax reliefs available in the form of R&D tax credits. There are two R&D tax credit schemes in the UK:

  • SME scheme: delivers between 26% to 33% of qualifying expenditure as refundable tax credits.
  • Large company scheme (RDEC): delivers a 12% boost to earnings before tax, in the form of a taxable above the line tax credit.

Creative sector tax relief

The creative industry plays a significant role in the UK economy. The government has introduced eight targeted tax credits designed to encourage development and production activities in the UK. These can result in a cash refund of up to 20% of eligible expenditure.

The tax credits are:

  • Film Tax Relief (FTR)
  • Animation Tax Relief (ATR)
  • High-end Television Tax Relief (HTR)
  • Children’s Television Tax Relief (CTR)
  • Video Games Tax Relief (VGTR)
  • Theatre Tax Relief (TTR)
  • Orchestra Tax Relief (OTR)
  • Museums and Galleries Exhibition Tax Relief (MGETR).

Employee share plans and incentives

Retaining and incentivising your people is an important objective for most employers and companies. Structuring your cash and share-based incentive arrangements to achieve that goal as effectively and efficiently as possible will give you a competitive advantage.

A quick guide to Patent Box

A scheme allowing companies to apply a 10% rate of Corporation Tax to profits attributable to qualifying patents, whether realised as royalties or embedded in the sale price of products.

A broad range of sectors, including electronics, defence, pharmaceuticals, life sciences and manufacturing can benefit.

To incentivise companies to retain and commercialise existing patents and to develop new, innovative patented products.

And not forgetting…
The regime also applies to some other IP rights such as plant variety rights, regulatory exclusivity rights and supplementary protection certificates (SPCs).

Content provided by BDO, Blick Rothenberg and Taylor Wessing. This information is intended for general guidance only. You should always seek professional advice.

How London & Partners can help

Our team offers free advice to potential investors, from startups to established companies. We can:

  • Introduce you to our professional network of tax and law specialists.
  • Connect you to networking groups.
  • Advise on setting up in London.

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