London is the third-largest city in Europe, and appears on virtually all rankings of global cities. It is not without good reason – it is one of the largest financial centers in the world, but it is also an important city due to its robust arts, research, and entertainment sectors. This means that starting a business in London presents a unique set of both opportunities and challenges.
However, before you can focus on growing your company, you’ll have to go through all the paperwork. In this article, you’ll learn the basics of how to get through these legal hurdles when starting a business in London.
In the UK, businesses are taxed on several levels. The most important taxes are income tax, capital gains tax, corporation tax, and value-added tax (VAT). You’ll need to know about these taxes before starting a business in London, but you may also be subject to other taxes, depending on what you do. The list is quite long, and you may need professional help to navigate through all the formalities. Experts from cartwrightking.co.uk or other legal advisors can assist you along the way.
Income tax is calculated at different rates depending on your personal situation. For instance, someone who is self-employed pays 20% income tax on their profits. This is true no matter how much money they actually earn. If they earn £20,000 per year, they will pay 20% income tax on that amount.
Capital Gains Tax
Capital gains tax is also calculated at different rates depending on the type of asset that is sold. For instance, if you buy shares in a company and sell them for more than you paid for them, you will be subject to capital gains tax. There are many exceptions to this rule, but it’s an example of how complicated the tax system in the UK can get.
Corporation tax is calculated at 18% for most companies. However, there are some exceptions to this rule. For instance, small companies with under £300k in revenue pay only 20% corporation tax.
Value-Added Tax (VAT) is a bit simpler to understand. It is a consumption-based sales tax that all companies must charge to their customers. The rate varies between 17.5% and 20%, depending on the product or service that the business sells.
It’s crucial that you understand how much money you will have to pay in taxes when starting a business in London, especially because these taxes are among the biggest cost factors for new businesses. However, there is good news: there are some limits on how many business owners have to pay in taxes.
When you own a sole proprietorship business or a partnership business, the government will not impose any additional taxes besides income tax, which is calculated in the same way as for sole proprietorship and partnership businesses. This means that those two types of businesses are usually exempt from capital gains tax and corporation tax.
This exemption does not mean that these businesses do not have to pay taxes – they do have to make payments based on their profitability, which means that even those two types of businesses have to pay VAT and employees’ National Insurance contributions.
That being said, the small business rate for corporations allows sole proprietors and partnerships with up to £150k in profit per year to be exempt from paying corporation tax for their first five years of operation.
Health and Safety
The health and safety regulations in London are among the most stringent in the world, which means that they can be challenging for both new and established businesses. They require companies to make sure that their employees are healthy and safe while working. The Health and Safety Executive (HSE) oversees health and safety regulations in the UK. It also provides guidance on how to meet health and safety requirements for businesses of different sizes.
In theory, employers in London have to abide by employment laws that are similar to those of other countries in the European Union (EU). In practice, many nuances could make doing business in London more difficult than expected. For instance, it’s important to be aware of employment laws related to hiring foreign nationals.
There are many employment laws that you have to abide by as a business owner in London, and failing to comply with these laws can have serious consequences. For instance, the government can shut down your business if you don’t follow the rules regarding employees’ health and safety.
Currency and Banking
When starting a business in London, you may need to use multiple currencies throughout your business operations. That being said, the majority of businesses in London only deal with pounds sterling and euros, which is why it’s wise to get familiar with those two currencies before starting a business in this city.
When you decide to start a business in London, you must choose where you will open a bank account. There are a few things to consider before picking an institution:
- Reputation: The reputation of the bank or building society is also an important consideration when choosing an institution. If you go with an unknown bank, there is a chance that it will go out of business at some point. This could cause you to lose your money. However, going with a well-respected bank can provide additional benefits, such as credit cards or insurance that will help protect your business from losses.
- Fees: You should also consider the fees you will pay for different services and products offered by various banks. For instance, your business might need a current account or an overdraft, but some banks charge more for these services than others. You should also consider transaction fees and fees for using ATMs.
Starting a business in London is not the easiest of tasks, especially if you don’t come from the UK and have to deal with various issues, from different laws and taxes to currency and banking standards. The list of formalities is quite extensive, and you need to make sure you follow all of the legal requirements to be able to operate in the UK.
That being said, remember that you don’t have to go through all the procedures on your own. Legal advisors can help you navigate through formalities and legalities, ensuring your business gets a good start. Then, you can explore all of the possibilities London has to offer.