How much tax does a small business pay in the UK?

A small business in the United Kingdom is required to pay tax based on the profits made. The amount of tax, and due date, varies depending on whether the business is run as a Sole Trade, Partnership, or Limited Company.

How much is business tax for sole traders?

A sole trader will pay tax at varying rates depending upon the level of profits. Each individual in the United Kingdom receives a personal tax allowance, and so unless this is set against other earned income, it will be set against the taxable profits of the self-employed business. Income tax will then be charged on the balance, starting at 20%, increasing to 40%, and then to 45%. Additionally, National Insurance is charged on profits – after the annual exemption, this is charged at 9% up to a set level, and 2% on the excess.

A sole trader pays income tax and national insurance twice per year – 31 January and 31 July.  The July payment is a ‘payment on account’ for future liabilities, the January payment is generally made up of a ‘balancing payment’ for the current year, and a ‘payment on account’ for future liabilities.

How much is business tax for partnerships?

Each member of a partnership is allocated a profit share. This is then treated as self-employed income and is taxed in the same way as a sole trader.

What taxes do limited companies pay?

Generally, a company in the United Kingdom pays Corporation Tax at 19% on the taxable profit of the business. Corporation tax is due for payment 9 months and 1 day after the year-end of the company, so a company with a year-end of 31 December is liable to pay corporation tax on 1 October the following year.

Payment dates will be adjusted if the company extends or shortens its accounting period.

Read next:

• What is self assessment tax and who pays it?
• What is small business tax and who pays it?
• What are company expenses? - Limited Company
• What are allowable business expenses? - Sole trader
• Do I need to complete a tax return?
• What is a business tax account and how do I set one up?

About the author

Seymour Griffiths is a Director based within our Aylesbury office of Haines Watts. He is a Certified Chartered Accountant and Chartered Tax Adviser.

Seymour oversees a team caring for accounts, personal and business tax, and management reporting for Sole-Traders, Partnerships and Limited Companies. Over the years, Seymour has worked with clients based both in the local area, and further afield, including some overseas assignments.