Europe · Ltd
United Kingdom company taxes
A UK-incorporated company is UK tax-resident by default, which means it pays UK Corporation Tax on its worldwide profits — not just UK-source income. For most non-resident founders that is the headline trade-off: you get a globally trusted Ltd, but its profits sit inside the UK net regardless of where you live. The rates are tiered and reasonable for early-stage businesses: 19% on profits up to £50,000, rising to a 25% main rate above £250,000, with marginal relief smoothing the band between. The good news for foreign owners is on the way out: the UK levies no withholding tax on ordinary dividends, so profits distributed to a non-resident shareholder leave the UK clean (subject only to your home country's rules). There is no entity-level capital tax, no municipal trade tax, and no surcharge for ordinary trading companies. The compliance load is real but predictable — annual accounts to Companies House, a CT600 to HMRC, and VAT returns if registered.
- Country
- United Kingdom
- Topic
- Taxes
- Reviewed
- June 2026
By the Lanzamo Editorial Team · Reviewed June 2026 · How we research
| Tax | Rate | Notes |
|---|---|---|
| Corporation tax — small profits rate | 19% | On taxable profits up to £50,000 (single company; thresholds divided across associated companies). |
| Corporation tax — main rate | 25% | On taxable profits above £250,000; marginal relief applies between £50k and £250k (effective ~26.5% on the slice). |
| VAT — standard rate | 20% | Reduced 5% and 0% categories exist. UK threshold £90,000; non-established persons (NETPs) must register from the first taxable supply. |
| Withholding tax — dividends | 0% | No UK withholding on ordinary dividends paid to non-resident shareholders. |
| Withholding tax — interest / royalties | 20% | Default 20% on UK-source interest and certain royalties to non-residents, often reduced or eliminated by a double-tax treaty. |
| Capital gains (companies) | 19%/25% | Company gains are taxed as part of corporation tax at the same rates; no separate corporate CGT. |
Corporation tax: how the tiers actually work
For the financial year beginning 1 April 2026 the rates are unchanged: 19% on the first £50,000 of taxable profit, 25% on profit above £250,000, and a tapered band in between via marginal relief. The marginal mechanism means each pound of profit between £50k and £250k is effectively taxed at about 26.5%, so a company sitting in the middle pays a blended rate. Critically for groups: the £50k and £250k thresholds are divided by the number of 'associated companies', so spinning up multiple UK entities does not multiply the 19% allowance.
VAT and the non-resident zero threshold
Standard VAT is 20%. UK-established businesses only register once turnover exceeds £90,000, but HMRC treats a company with no fixed UK establishment as a Non-Established Taxable Person (NETP) with a registration threshold of zero — it must register before its first taxable UK supply, even a single small sale. This catches non-resident founders who store inventory in a UK fulfilment centre or sell digital/goods to UK consumers. Pure B2B services supplied to overseas customers are often outside UK VAT, so whether you must register depends entirely on what and to whom you sell.
Dividends and withholding for foreign owners
The UK is unusually clean here: it imposes no withholding tax on ordinary dividends, so when your UK Ltd distributes profit to you as a non-resident shareholder, nothing is withheld at the UK end. Non-residents are also generally not chargeable to UK tax on those dividends beyond any tax already paid. The 20% default withholding applies to UK-source interest and certain royalties — not dividends — and is frequently reduced by treaty. Your home country may still tax the dividend, so coordinate with a local adviser.
How a non-resident-owned company is taxed
Because the company is incorporated in the UK, it is UK-resident and taxed on worldwide profits — your living abroad does not move the tax base offshore. Separately, the 'central management and control' test can pull an overseas-incorporated company INTO the UK net if its real decision-making happens in the UK; for a UK-incorporated company the more relevant risk is the reverse — running genuine operations or staff in another country can create a foreign permanent establishment and split the tax. For a clean single-jurisdiction setup, keep it a straightforward UK Ltd taxed wholly in the UK.
Losses, reliefs and incentives
Trading losses can be carried forward against future profits (and, within limits, carried back one year). The UK offers genuinely valuable incentives: R&D tax relief (the merged RDEC scheme, with enhanced support for R&D-intensive SMEs), the Patent Box (10% rate on profits from patented inventions), and full expensing / annual investment allowance for qualifying capital spend. These are claimable by a foreign-owned company the same as a domestic one, provided the activity genuinely occurs.
Filing calendar
Corporation tax is due 9 months and 1 day after the end of your accounting period; the CT600 return is filed within 12 months of period end. Statutory accounts go to Companies House (generally within 9 months of year-end for a private company), and the annual confirmation statement (£50 online from 1 Feb 2026) is due each year. VAT returns, if registered, are usually quarterly under Making Tax Digital. Missing the CT600 or accounts deadlines triggers automatic, escalating penalties.
Frequently asked questions
Will my UK company be taxed on income I earn outside the UK?
Yes — a UK-incorporated company is UK tax-resident and pays Corporation Tax on its worldwide profits, not just UK-source income. Living abroad does not change that. You may get relief for foreign tax paid via treaties or a foreign permanent establishment, but the default base is worldwide.
Does the UK withhold tax when my company pays me a dividend abroad?
No. The UK levies no withholding tax on ordinary dividends, so dividends paid to a non-resident shareholder leave the UK without deduction. Your own country of residence may tax the dividend, so check the rules and any double-tax treaty where you live.
I'm a non-resident with no UK customers — do I still need to register for VAT?
Often not — if you make no taxable supplies in the UK. But beware the NETP rule: a company with no fixed UK establishment has a zero VAT threshold and must register from its first UK taxable supply, for example if you stock goods in a UK warehouse or sell to UK consumers. Pure overseas B2B services are frequently outside UK VAT.
What is the lowest realistic tax rate for an early-stage UK company?
19% — the small-profits rate on the first £50,000 of taxable profit. Add R&D relief or the Patent Box and the effective rate on qualifying activity can fall further. Above £250,000 of profit you reach the 25% main rate, with the band in between taxed at an effective ~26.5%.
Sources
- Companies House — fees are changing from 1 February 2026 (GOV.UK)
- GOV.UK — Register a private or public company (IN01)
- GOV.UK — Corporation Tax rates and reliefs
- GOV.UK — Register for VAT (and non-established businesses)
- HMRC International Manual INTM120170 — company residence: individual directors
- PwC Tax Summaries — UK corporate income tax (19%/25%)
- PwC Tax Summaries — UK withholding taxes (no WHT on dividends)
- Deloitte Taxscape — UK tax rates 2026/27
- ICAEW — significant hikes to Companies House fees in 2026
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