A Complete Guide to Business Taxes in the UK [Fully Explained]

In the UK, businesses need to pay taxes on profits, sales, property, employees, and other business operations. 

The taxes you pay depend on how your business is structured, how much you earn, whether you employ people, and whether you need to register for VAT. Each tax has its own rules, thresholds, and deadlines, and it’s important to understand which ones apply to your situation. 

Here's a full breakdown of business taxes in the UK, including what triggers each one and when payments are due.

Key points

• Tax is based on profits, not just revenue 💷
  Your taxable income is usually calculated after deducting allowable business expenses. Accurate records can help you avoid paying more tax than necessary.
• Each tax has its own deadlines 📅
  Self Assessment, Corporation Tax, VAT, and other business taxes have separate filing and payment dates. Keeping track throughout the year helps you avoid penalties.
• VAT applies based on your turnover, not your business type 🧾
  Both sole traders and limited companies may need to register for VAT once their taxable turnover exceeds the £90,000 threshold.
• Tax management is easier with the right tools 🚀
  ANNA brings bookkeeping, tax estimates, and filing support together in one place, helping you stay organised and prepared for upcoming tax bills.

How your business structure decides what you pay

If you're a sole trader or in a partnership, the business and you are treated as one and the same for tax purposes. All the profit is yours, and you pay Income Tax and National Insurance on it through Self Assessment. 

A limited company is a separate legal entity from its owners and directors, and it pays Corporation Tax on its own profits. Anything you draw out as a director, whether that's salary or dividends, is taxed again on your director Self Assessment return. 

UK business taxes for sole traders 

If you operate as a sole trader or partnership, all business income and expenses go through your personal Self Assessment return. Here’s an in-depth look at the taxes you need to report and pay:

Income Tax

As a sole trader, you pay Income Tax on your business profits, not your turnover. That means you deduct allowable expenses first, and only the remainder counts as taxable profit.

For the 2026/27 tax year, the Income Tax rates are:

The Personal Allowance is £12,570. This is the amount you can earn tax-free.

These figures will be frozen until April 2031. 

As your profits grow, more of your income tends to fall into higher bands. This is called ‘fiscal drag’.

If your income exceeds £100,000, your Personal Allowance starts to shrink by £1 for every £2 you earn above that threshold. It then disappears once you earn £125,140. 

How to report and pay Income Tax

You need to complete a tax return each year, declare your business profits, and pay any tax due to HMRC by the relevant deadlines. 

If you're newly self employed, you need to register for Self Assessment with HMRC by 5 October following the end of the tax year in which you started trading. Once you register, the deadlines are:

Payments on account are advance payments towards your next Self Assessment bill. Each payment is usually half of your previous year’s tax bill, meaning you may need to pay more than one year’s tax amount when you first enter the system. 

You won’t need to make payments on account if your tax bill is less than £1,000 or if most of your tax is already collected through another method, such as PAYE. 

National Insurance

In addition to Income Tax, sole traders pay Class 4 National Insurance on their profits. For 2026/27, you pay 6% on profits between £12,570 and £50,270, then 2% on anything above that.

Class 2 National Insurance used to be a separate flat weekly charge, but it's no longer mandatory. If your profits exceed the small profits threshold of £7,105, you're automatically treated as having paid Class 2, which protects your State Pension record at no cost. 

Below that threshold, you can choose to pay it voluntarily at £3.65 a week to avoid a gap in your record.

Both Class 4 and voluntary Class 2 contributions are calculated and collected through your Self Assessment return, alongside your Income Tax.

UK business taxes for companies

If you run a limited company, the company itself is taxed first, and then you're taxed again personally on anything you draw out of it.

Here are the corporate taxes you need to manage: 

Corporation Tax

Limited companies pay Corporation Tax on their taxable profits, which include trading profits, investment income, and any gains from the sale of business assets.

There are two rates for Corporation Tax:

• Small profits rate: 19% on profits up to £50,000
• Main rate: 25% on profits above £250,000

For profits between £50,001 and £250,000, companies don’t pay a single Corporation Tax rate. Instead, they may qualify for Marginal Relief, which gradually increases the tax rate from 19% towards the 25% main rate as profits rise. 

The amount of relief depends on the company’s taxable profits and other factors, such as whether it has associated companies. 

If your company has associated companies under common control, the Corporation Tax thresholds are divided between them. For example, two associated companies would each have a £25,000 small profits rate threshold and a £125,000 main rate threshold, meaning they can reach the higher effective rate sooner. 

How to report and pay Corporation Tax

Limited companies have to pay Corporation Tax before submitting their Company Tax Return. The payment deadline is earlier than the filing deadline, so you need to calculate your Corporation Tax bill in advance. 

The CT600 form is the official document that tells HMRC how much profit your company made, what deductions you’re claiming, and how much Corporation Tax is due. To support the figures, you submit your company accounts and supporting calculations.

You have to pay Corporation Tax nine months and one day after the end of your accounting period.

Then, 12 months after the accounting period ends, you have to submit your Company Tax Return.

If you pay too little Corporation Tax, HMRC will charge interest on the unpaid amount from the payment deadline until you pay the balance. 

You may also face penalties if your return contains errors that lead to an underpayment. If you pay too much, HMRC will repay you or allow you to offset the overpayment against future Corporation Tax bills. 

💡 Did you know? 

ANNA's Corporation Tax tool works out your bill from your bookkeeping as you go, so you're not left estimating your Corporation Tax at the last minute.

Dividend Tax

Once your limited company has paid Corporation Tax on its profits, any dividends you draw from what's left are taxed again on your personal return.

You get a £500 dividend allowance before any tax applies. Above that, dividend income is taxed according to the Income Tax band it falls into.

Here are the 2026/27 dividend tax rates:

Since dividends aren’t subject to National Insurance, many director-shareholders use a combination of salary and dividends to take money from their company. They often pay themselves a salary up to a tax-efficient level, then take additional income as dividends from the company’s remaining profits.

The most tax-efficient split depends on your circumstances, including your total income, available allowances, and the tax rates that apply in the year.

How to report and pay Dividend Tax

You report dividend income through your Self Assessment tax return. Your company doesn’t deduct Dividend Tax before paying you – you are responsible for declaring the income and paying any tax due to HMRC.

You should keep records of all dividends you receive, including dividend vouchers and company board minutes showing when dividends were declared. These records help support your tax return if HMRC asks for evidence.

UK business taxes for both sole traders and limited companies

Some UK business taxes apply regardless of whether you operate as a sole trader or a limited company. Here’s what you need to know.

VAT

VAT is a tax on eligible goods and services that businesses charge their customers and then pass on to HMRC. 

VAT applies once your taxable turnover passes £90,000 in any rolling 12-month period. You need to register within 30 days of crossing that threshold, and once registered, you charge VAT on your sales and can reclaim it on your business purchases.

You can also register voluntarily before you reach the threshold, which some businesses do to reclaim VAT on setup costs or to appear more established to VAT-registered clients.

The VAT rate you charge depends on what you sell. 

If you expect your taxable turnover to stay below £88,000 over the next 12 months, you can apply for VAT deregistration, though HMRC will want evidence to support that expectation.

How to report and pay VAT

As a VAT-registered business, you report VAT through regular VAT returns, usually every three months. Your return shows the VAT you charged customers, the VAT you paid on business purchases, and the difference you owe HMRC. 

The deadline for both filing and paying VAT is one calendar month and seven days after the end of your VAT period. 

Capital Gains Tax

If you sell a business asset, such as property, equipment, or shares, and make a profit on the sale, Capital Gains Tax (CGT) may apply. This mostly affects sole traders and partners, since limited companies pay Corporation Tax on any gains instead.

For 2026/27, individuals get an annual exempt amount of £3,000 before any CGT applies. Above that, gains, including those on residential property, are taxed at 18% within the basic rate band and 24% above it.

Reliefs such as the Business Asset Disposal Relief can reduce the rate further if you're selling all or part of a business you've owned for at least two years, though the rules for qualifying are specific, so check your eligibility with an accountant.

Other taxes worth knowing about

Some business taxes only apply in specific situations, such as when you employ people, use commercial property or buy land. 

Depending on your circumstances, you may come across these taxes:

PAYE and employer National Insurance

If you employ staff, you usually need to register as an employer with HMRC and run payroll. 

You deduct Income Tax and employee National Insurance from wages before paying employees, then report payroll information to HMRC. You may also need to pay employer National Insurance contributions on their earnings. Director salaries normally go through PAYE too.

Business rates

If your business uses commercial premises, such as an office, shop, or workshop, you may need to pay business rates to your local council. The amount is based on the property’s rateable value, which is an estimate of how much rent the property could achieve on the open market.

Stamp Duty Land Tax

If your business buys land or property in England or Northern Ireland, it may need to pay Stamp Duty Land Tax if the purchase price exceeds the relevant threshold. The amount depends on factors such as the property type, purchase price, and the buyer’s status (company or an individual). 

Get on top of your business taxes with ANNA

Tracking Income Tax, Corporation Tax, VAT, and Dividend Tax deadlines by hand is a lot, especially once your business grows.

ANNA brings your bookkeeping, tax calculations, and filing into one place, so you always know what you owe and when it's due.

Here's what you get with ANNA:

• Auto Accountant: Tracks your income and expenses as they happen and estimates your tax bill in real time, so there are no surprises in January
• Free Self Assessment filing: Guides you through your return step by step and automatically calculates what you owe
• Corporation Tax filing: Works out your company's Corporation Tax bill directly from your bookkeeping records
• VAT filing: Allows you to submit your VAT return in a few clicks, in full compliance with Making Tax Digital
• Business account: Keeps your business finances separate from your personal money, so it’s easier for you to track transactions, manage cash flow, and maintain organised records
• Smart money pots: Lets you set aside money automatically as it comes in, so your tax bill is already covered when the deadline arrives
• 24/7 UK-based support: Connects you to a real person through in-app chat whenever a tax question comes up

Open an ANNA account today and let your business taxes take care of themselves.