VAT (Value Added Tax) applies to most goods and services. The standard rate is 20%, with a reduced 5% rate and a 0% rate for certain categories.

When registration becomes mandatory:

• If your taxable turnover exceeds £90,000 over the last 12 months;
• Or if you expect to exceed this threshold in the next 30 days.

Voluntary registration: you can also register below the threshold. It makes sense if you mainly sell to other VAT-registered businesses and want to reclaim VAT on your expenses.

Once registered, you file VAT Returns — usually quarterly — electronically, through Making Tax Digital.

If you have a limited company, the company pays tax on its profits. The current rates are:

• 19% on profits up to £50,000 (small profits rate);
• 25% on profits over £250,000 (main rate);
• Between these thresholds, marginal relief applies — a gradual effective rate.

Key deadlines: payment is usually due 9 months and 1 day after the end of the accounting period, and the company tax return (CT600) is due within 12 months.

You legally reduce your taxable profit through legitimate allowable expenses related to the business. Good bookkeeping makes all the difference here.

The Confirmation Statement is a filing to Companies House confirming that your company details are correct and up to date: registered office, director, shareholders, SIC code and people with significant control (PSC).

• It must be filed at least once every 12 months, even if nothing has changed;
• It is not a financial statement — it contains no profit or balance sheet figures;
• The online filing fee is £50 (from 1 February 2026).

Warning: if you do not file the Confirmation Statement, the company can be struck off the register. It is one of the simplest obligations — and one of the most often forgotten.

Sole trader (self-employed individual):

• Simple to start, fewer formalities;
• You and the business are the same entity — unlimited liability;
• You pay Income Tax and National Insurance through Self Assessment.

Limited company:

• A separate legal entity — limited liability, protecting your personal assets;
• More credibility with clients and banks;
• More obligations: reporting to both Companies House and HMRC.

If you choose a limited company, see our step-by-step tutorial — start your company at a reduced fee.

Self Assessment is the system HMRC uses to collect income tax from people not automatically taxed through PAYE — for example sole traders, company directors or those with additional income.

• You register with HMRC and receive a UTR (Unique Taxpayer Reference);
• You file the return online, usually by 31 January for the previous tax year;
• The tax due is also payable by 31 January.

Late filing triggers automatic penalties, so it pays to have your documents ready in good time.

As director and shareholder of a limited company, there are two main ways to take money out: salary and dividends.

• Salary is a deductible expense for the company and goes through PAYE / National Insurance;
• Dividends are paid from post-tax profit and are taxed differently, often more favourably.

The optimal mix of the two depends on the company’s profit and your personal situation.

A good credit score — personal and business — opens the door to cheaper funding: loans, business cards, leasing for equipment or vehicles.

• Banks and lenders check your credit history before approving any funding;
• A low score means higher interest rates or a refusal;
• The score is built over time: on-time payments, responsible credit use, joining the electoral roll.