Lawyer
An expert in corporate and international corporate law. He has many years of experience in establishing and reorganizing companies, supporting M&A transactions, as well as providing legal support for opening and running a business in the EU, Asia, and North America.
UK TAX ADVICE
It is critical for businesses to understand not only current rates, but also legislative updates that come into effect in 2025.
So, let’s consider the main types of taxes, the legislative framework, benefits, and key changes relevant for 2025.
Taxes in the UK are regulated by the Income and Corporation Taxes Act 1988 (ICTA 1988), the Corporation Tax Act 2010 (CTA 2010), the Value Added Tax Act 1994 (VATA 1994) and other acts.
Main taxes for business:
- Corporate tax.
- Value Added Tax (VAT).
- Personal income tax (Income Tax) (for sole traders).
- National Insurance Contributions (NIC).
- Capital Gains Tax (CGT).
- Corporation Tax – paid by legal entities (companies) on profits earned in the UK or abroad (if the company is a UK resident).
Basic rate: 25% for companies with profits > £250,000 per financial year (1 April 2025 – 31 March 2026)
Small Profits Rate: 19% for companies with revenue ≤ £50,000
Marginal Relief: Valid for profits from £50,001 to £250,000.
Formula: Tax=£200,000 Profit−£50,000×(Basic rate−Lower rate)+Lower rate×Profit
Submission deadline: 12 months after the close of the financial year.
- Advance payments (Instalment Payments) — for companies with revenue > £1.5 million (previous year).
Final payment — up to 9 months after the close of the financial year.
At the same time, pay attention to the updates that will take effect from 2025, namely, an increase in penalties for late payment.
From April 6, 2025, the penalty for late payment of corporate tax increases from 2.5% to 4% above the Bank of England base rate.
There are also administrative simplifications in place. HMRC will stop sending 6 types of non-essential corporate tax-related letters from June 2025 (e.g. deadline notices)
- Value Added Tax (VAT) – (20% standard rate) is paid on:
- Selling goods/services in the UK.
- Import of goods to the UK.
- Providing services from the UK domestically (B2B) or abroad (B2C).
Rates in 2025:
- Standard: 20% (most goods/services).
- Reduced: 5% (e.g. heating fuel, energy).
- Zero: 0% (e.g. books, food).
From 2025 update – VAT on tuition in private schools. From January 2025, 20% VAT will be introduced for tuition in private schools (except for state ones):
- From 2025, the use of digital invoices (e-invoicing) is expanding to simplify audits
- VAT on virtual events – new EU regulations require VAT to be applied to virtual conferences/webinars if participants are from the EU.
Personal income tax (Income Tax) –Sole traders (individuals running a business) pay Income Tax on net profit:
- Basic rate: 20% (up to £50,270).
- Higher rate: 40% (£50,271–£125,140).
- Additional rate: 45% (> £125,140).
- Personal Allowance: £12,570 (tax-free)
There are also some features such as Cash Basis. For small businesses (revenue < £150,000) you can use a simplified accounting system (income/expenses for the period, not on an accrual basis).
National Insurance Contribution (NIC)
- For companies — class 1 (employer): 15% (from 2025, previously 13.8%) of employee wages over £175/week
- For employees — class 1 (employee): 12% (up to £967/week) + 2% (over £967).
Capital Gains Tax (CGT)
- Basic rate: 10% (up to £50,270).
- Top rate: 20% (over £50,270).
From April 6, 2025, all UK residents with a residence period of >4 years must declare and pay tax on worldwide income/profit.
Benefits and incentives for business
- R&D (research and development)
UK provides tax breaks for R&D:
- for small and medium-sized enterprises (SMEs) — 130% expense deductions (for companies with <500 employees, turnover <€100 million) and cash bonus (R&D Tax Credit) in case of loss;
- for large companies — 30% through the RDEC scheme.
2024 Update: From 1 April 2024, the SME and RDEC schemes are merged into a single system with a 20% tax credit on expenses
- 2Free Zones
Tax deferral: 10-year for companies operating in 8 free zones (e.g. London Docklands, Belfast).
- Seed Enterprise Investment Scheme (SEIS)
Investors receive 50% deductions on investments in startups (up to £100,000).
For companies it is required: <25 employees, assets <£200,000. Total SEIS funding per company is up to £250,000
It can be said that the UK tax system in 2025 remains dynamic, with an emphasis on simplifying administration and combating arrears.
At the same time, it is critical for businesses to understand rates, updates (e.g. VAT on private schools) and use benefits (R&D, SEIS).
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