UK Tax & Legal Guide for Small Businesses

Everything you need to understand your tax and legal obligations as a UK small business owner in 2026 — from VAT and corporation tax to IR35, GDPR, and protecting your intellectual property.

Tax Obligations

Key taxes every UK business owner needs to understand

VAT Registration

Mandatory threshold £90,000. Flat Rate Scheme, voluntary registration, and MTD for VAT.

Corporation Tax

19%/25% two-rate system, CT600 filing, AIA, director salary strategy.

Self-Employed Tax

Register with HMRC, Self Assessment deadlines, Class 4 NI, allowable expenses.

Making Tax Digital

MTD for VAT already live. MTD ITSA rollout: April 2026/27/28.

R&D Tax Credits

Merged scheme from April 2024. 20% credit rate. Pre-notification required.

IR35 / Off-Payroll

Inside vs outside IR35. Who determines status. CEST tool. Small company exemption.

Legal Obligations

Compliance, data protection, and intellectual property

UK GDPR

ICO registration, privacy policies, lawful basis, 72-hour breach notification.

Intellectual Property

Trademark £170, copyright automatic, patents, registered designs, trade secrets.

Company Formation

Sole trader vs limited company, registration at Companies House, shares and directors.

Do you need an accountant?

Most sole traders can manage their own Self Assessment. Limited companies almost always benefit from professional help — statutory accounts, CT600 filing, and tax planning advice typically save more than the accountant's fee.

How to choose an accountant →

Frequently Asked Questions

Sole traders pay Income Tax on their profits (20%, 40%, or 45% depending on the amount, after the £12,570 personal allowance) and Class 4 National Insurance (8% on profits between £12,570 and £50,270, 2% above). Class 2 NI was abolished in April 2024. Tax is paid via Self Assessment, with returns due by 31 January.

A limited company pays Corporation Tax on its profits: 19% (small profits rate) on profits up to £50,000, or 25% (main rate) on profits over £250,000, with Marginal Relief tapering between. Directors also pay Income Tax and NI on their salary, and Dividend Tax on dividends above the £500 annual allowance.

You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period. You can also register voluntarily below this threshold — beneficial if your customers are VAT-registered businesses who can reclaim the VAT, or if you want to reclaim input VAT on significant purchases.

MTD for VAT is already mandatory for all VAT-registered businesses. MTD for Income Tax (ITSA) starts April 2026 for self-employed/landlords earning over £50,000; April 2027 for over £30,000; April 2028 for over £20,000. You will need HMRC-approved software such as Xero, QuickBooks, or FreeAgent.

Most businesses that process personal data must pay the annual ICO data protection fee: £40/year for micro/small businesses (under 10 staff and £632,000 turnover). Some sole traders with very limited data processing may be exempt — check the ICO website to confirm your status.