Understanding UK Business Taxation in 2025

Introduction to UK Business Taxation

The United Kingdom consistently ranks high in global business climate ratings. This is largely due to its flexible and predictable tax system, which is particularly attractive for small and medium-sized enterprises (SMEs) and online businesses. Despite global trends towards stricter regulations, the UK remains a hub where entrepreneurs can legally optimise their taxes and access a vast international market.

This article explores the specifics of business taxation in the UK in 2025. We will cover the taxes companies pay, applicable rates, and available benefits for online businesses. Learn what taxes businesses pay in the UK in 2025, including corporation tax and VAT. Discover tax rates, benefits, and how to optimise taxes with Foundry Accounting.

Features of the UK Tax System

The UK tax system is renowned for its transparency, stability, and logical structure. A key advantage is the clear separation between corporate and personal taxation. This separation enables businesses to plan expenses and minimise tax risks effectively.

UK tax legislation is regularly updated to reflect modern business needs. Rules and requirements are accessible via official sources like HMRC. Most tax reports are submitted online, which simplifies compliance. The system offers numerous reliefs, deductions, and incentives, especially for innovative or export-focused companies. Competitive tax rates and double taxation treaties further reduce costs for businesses operating internationally.

Taxes for Legal Entities

The UK offers non-residents, including those from Russia and CIS countries, the ability to establish businesses as a Limited Liability Partnership (LLP) or Private Limited Company (LTD). Each structure has distinct tax implications.

LLP: Features and Taxation

A Limited Liability Partnership (LLP) is suitable for online businesses, consulting, IT services, and international trade. LLPs are pass-through entities. This means the company itself pays no corporation tax if all partners are non-UK residents and activities occur outside the UK. Instead, profits are taxed at the partners’ level based on their tax residency.

If all LLP partners are non-residents and the business operates entirely abroad, the UK tax rate for the LLP is 0%. However, if the LLP operates in the UK or includes UK-resident partners, it becomes subject to standard taxation.

LTD: Corporation Tax and Rates

A Private Limited Company (LTD) is the most common business structure. It is ideal for online trading, SaaS, and agency services. LTDs pay corporation tax on profits, with rates in 2025 set at:

• 19% for profits up to £50,000 (small profits rate).

• 25% for profits above £250,000, with marginal relief for profits between £50,000 and £250,000.

  
  

If an LTD operates solely outside the UK without a permanent establishment or employees in the country, its profits may be exempt from UK corporation tax. This is subject to international tax laws and residency status. Consult Foundry Accounting for tailored advice.

What Taxes Do Non-Resident Companies Pay?

Non-resident companies registered in the UK are largely exempt from local taxes if their activities occur outside the country. For LLPs, if all partners are non-residents and operations are abroad, no UK corporation tax applies (0% rate). Profits are taxed in the partners’ home jurisdictions.

For LTDs, the standard corporation tax rates (19–25%) apply to UK-sourced profits. However, profits earned abroad may be exempt if there’s no UK permanent establishment.

The UK levies 0% withholding tax on dividends paid to non-residents. This allows profits to be transferred abroad freely. Value Added Tax (VAT) at 20% applies only to goods or services sold within the UK. Registration is mandatory for businesses exceeding the £90,000 turnover threshold in 2025. Companies serving foreign clients typically face minimal or no VAT obligations.

To optimise your tax strategy and ensure compliance, contact Foundry Accounting. They help calculate taxes accurately and save money legally.

Conclusion

Understanding the UK tax system is crucial for businesses, especially in 2025. The clear structure and various options available make it an attractive location for entrepreneurs. Whether you choose to operate as an LLP or an LTD, knowing the tax implications can significantly impact your business's success.

For more information on how to navigate the UK tax landscape, consider reaching out to professionals like Foundry Accounting. They can provide valuable insights tailored to your specific needs, ensuring that you make the most of the available benefits while remaining compliant with regulations.

By staying informed and proactive, businesses can thrive in the UK’s dynamic market.