Registering a company in England can bring many financial benefits. The most popular and accessible form of doing business in the UK is the Limited Company (LTD company). European Union residents are willing to set up companies in the UK to save on taxes and insurance premiums.
What is a Limited Company?
A Limited company has its own legal personality, which means that the company’s shareholders are only liable for the company’s obligations up to the amount of their contribution. What is more, according to the regulations, the initial capital is any amount, unlimited from below or above, which means that a Limited company in the UK can be established by anyone, without any significant investment. The initial capital is declared; shareholders do not have to put money into a company account.
Costs of running a business in England
One of the most frequently mentioned advantages of running a business in the UK is the high tax-free amount (Personal Allowance), which is currently as high as £12,500 a year, or £1,041 a month. In comparison, the tax-free amount in Poland for most people is PLN 3091 (people earning relatively little have a higher tax-free amount, but in return, taxpayers with income from the second tax bracket are entitled to a lower tax-free amount or no tax-free amount at all).
The higher your tax-free allowance, the lower your taxes. Relatively low tax obligations in the UK make it easier to maintain financial liquidity, which helps business owners from around the world run their companies. Limited Companies registered in the UK benefit from business continuity.
Registering a company in England not only entails the possibility of benefiting from a high tax-free amount, but also from lower insurance contribution liabilities. In the UK, every taxpayer is entitled to a contribution-free amount (Lower Earnings Limit).
In the UK, all taxpayers benefit from a Lower Earnings Limit, meaning that National Insurance contributions are only payable after exceeding the Primary Threshold, which in 2020 is £9,500 per year or £792 per month. If your income exceeds this threshold, National Insurance contributions are based on your profits. For comparison, in Poland, after the preferential period, all entrepreneurs must pay uniform ZUS contributions, currently around PLN 1,300.
Don’t want to pay high insurance premiums in Poland or another European country? Register a Limited company in the UK and enjoy all the benefits!
Advantages of running a Limited Company in the UK
Running a limited company in the UK does not require the purchase of a cash register. This is because the entrepreneur can decide for himself how to document his transactions.
Other benefits include a simple tax system and minimal formalities for business owners. The UK government and tax authorities aim to make running a business in the UK simple and relatively inexpensive, benefiting both taxpayers and the country’s economic growth.
Limited Companies offer limited liability for shareholders based on their contributed capital. Additionally, having a UK-registered company adds prestige and provides branding benefits, making it easier to attract clients and increase business revenue.
Who can set up a Limited Company in the UK?
Anyone, regardless of nationality or residence, can set up a Limited Company in the UK. You don’t need to be a UK resident to register a Limited Company. However, this solution is not suitable for everyone living in Poland, especially if you sell goods or services in a specific physical location, such as a shop or service point.
Running a limited company in the UK does not require the purchase of a cash register. This is because the entrepreneur can decide for himself how to document his transactions.
Freelancers who most often set up companies in the UK include:
- IT specialists,
- Graphic designers,
- Architects,
- Photographers,
- Designers,
- Translators,
- Copywriters,
- Bloggers,
- Tutors,
- Advisors,
- Lawyers,
- E-commerce professionals
Tax settlement in the UK is only possible if the Limited company has its registered office in the UK, there is no contraindication for the registered office to be a virtual office. A virtual office will therefore provide you with the opportunity to operate from another country and enjoy the benefits available to taxpayers settling in the Islands.
Registration of a Limited company in the UK
Setting up a Limited Company takes 24 hours, and registration can be done online. To do this, you must submit the necessary documents and pay the registration fee.
Within 72 hours of your registration application being sent to Companies House , you will receive a set of documents (certificate of incorporation and memorandum of association) electronically confirming your company registration. Later, you will receive the remaining documents, such as the authentication code and the UTR number issued by HMRC (the UK equivalent of the Polish tax office).
Nothing prevents you from setting up a Limited Company yourself, you will then be a 100 per cent shareholder in your company and consequently all profits will be yours. An LTD company can also be registered with other persons or even with another company. The British regulations do not indicate a maximum number of partners. At least one Director and one Shareholder are necessary in an LTD company (there is no contraindication for one person to be both a Director and a Shareholder at the same time). A separate function is that of Secretary in a Limited company, who cannot be a Director of the company, but under the regulations, the company is not required to appoint a Secretary.
How are taxes handled in the UK?
Business owners running a Limited Company in the UK file taxes once a year. The UK tax year runs from April 6th to April 5th of the following year. LTD company owners have 9 months to file their tax return after the end of the financial year—January 31st is the final deadline for submitting the previous year’s tax return. If HMRC notices a delay in submitting the tax return, you will be fined.
Companies in the UK and pension benefits
Another advantage of running a company in the UK is the right to a UK pension. The retirement age in the UK varies by taxpayer, but it is generally 68 years old. You can apply for the minimum pension after working in the UK for 10 years. This period can be broken up; only full tax years are counted. Importantly, you must exceed the Lower Earnings Limit (£6,136 annually or £512 monthly) to be eligible for UK social benefits.
Paying yourself from a Limited Company
Every individual in the UK is entitled to a tax-free personal allowance, which is the same for all, regardless of income.
The director of a Limited Company can pay themselves a director’s salary, which must be paid monthly. This method is popular due to the high tax-free and National Insurance-free allowances. Up to the annual tax-free allowance of £12,500, the director pays no income tax, and up to £8,632, no National Insurance contributions are due. To pay yourself as a director, the company must first register with HMRC as an employer under the PAYE (Pay As You Earn) system.
Another way for shareholders to receive payment from the company is through dividends, which can only be paid if the company makes a profit and only up to the amount of the profit. Dividends are subject to a 19% Corporation Tax, making this option financially viable only after utilizing the full tax-free salary allowance in a given tax year.
Closing a Limited Company
If your business isn’t profitable, you can dissolve the Limited Company at any time. Closing a company in the UK is simple, quick, and requires minimal formalities.
It’s important to distribute the company’s assets to shareholders before the formal dissolution. If you don’t do this, your assets will be transferred to the state.
The dissolved Limited Company must file a strike-off form with Companies House and send it to shareholders, creditors, employees, and company managers.
