How to Open an LTD Company in the UK?

Before starting a company in the UK, it’s essential to select the appropriate legal form. This article explores the specifics of LTD companies in the UK, covering registration, taxation, and reporting.

Forms of Organisation

To register a business in the UK, you must choose a legal structure. Non-residents typically opt for one of two forms: LLP or LTD.

LLP (Limited Liability Partnership) features pass-through taxation, meaning the partnership itself is not subject to corporation tax. Instead, profits are reported on the personal tax returns of the partners. If the LLP operates outside the UK and its partners are non-residents, it may avoid UK taxation, reducing business costs.

LTD (Limited Company) is a limited liability company, similar to an LLC. Unlike LLPs, LTDs are subject to corporation tax at 25% (with a small profits rate of 19% for profits up to £50,000).

Both structures can conduct business in the UK and internationally, using global services. LLPs are often chosen by businesses not operating in the UK or without UK counterparties. Foundry Accounting specialists can provide detailed guidance to help clients select the best structure for their needs.

LTD: Features of the Company

A Limited Company (LTD) is a company with limited liability, requiring at least one founder. Shareholders’ liability is restricted to their shares in the share capital, protecting their personal assets.

The requirements for establishing an LTD in the UK are minimal. The company must have a registered office in the UK. It requires at least one director, with a company secretary being optional. There are no minimum share capital requirements.

The director and shareholders’ residency is irrelevant. The director must be an individual, but shareholders can include other companies, including foreign ones.

LTDs are subject to corporation tax and must file annual statutory accounts with Companies House, unlike LLPs, which are generally exempt from this requirement.

LTDs suit entrepreneurs planning to operate both in the UK and abroad. A key advantage is their appeal to investors, as external parties can purchase shares without joining the company, unlike LLPs, where investors must become partners. Despite stricter requirements than LLPs, LTDs are the most popular business form in the UK due to their reputable status. State oversight ensures greater trust from partners, investors, and clients.

Taxation

The UK tax system includes several levies, with corporation tax being the primary tax for LTDs. The rate depends on profits: 19% for profits up to £50,000, 25% for profits above £250,000, with marginal relief for profits in between, calculable via the HMRC website.

Other taxes include VAT, excise duties (e.g., on fuel, tobacco, alcohol, gambling), and property taxes. The standard VAT rate is 20%, with reduced rates of 5% (e.g., energy-saving products) or 0% (e.g., medical goods, food, education). LTDs owning property also pay annual council taxes.

And all business owners ask themselves how to calculate taxes correctly? Foundry Accounting can help them in this matter!