HOW TO START A BUSINESS IN THE UK?
WHICH VISAS ALLOW FOREIGNERS TO CONDUCT A BUSINESS IN THE UK?
Start-up & Innovator routes
These routes are for those who want to set up and run an innovative business in the UK. This business or business idea must be endorsed by an approved body, also known as an endorsing body.
Under these routes:
Generally, all you need is to secure the endorsement letter and a check for £50,000. There are three main types of such endorsing bodies:
Each Endorsing Body has its own process of screening and approving the candidates, but generally, they need to make sure your business idea is:
Learn more about the required documents, fees and visa duration here.
Global Talent Visa
This visa is suitable for talented and promising professionals from different fields and entrepreneurs from all over the world who wish to move to the UK.
With this visa, you can start and develop a new or transfer an existing business to the UK. You can live and work in the UK for up to 5 years. Before applying for the Global Talent visa, you need to have either won an eligible award or successfully applied for an endorsement to prove that you are a leader or potential leader in your field.
Full information on the Global Talent Visa can be found here.
WHAT ARE THE FORMS OF BUSINESS OWNERSHIP IN THE UK?
Depending on the type and scale of the company's activities, choosing the most appropriate form of ownership is of utmost importance. For example, for those wishing to open a small business in the UK, individual entrepreneurship (a sole trader) is most suitable. Two other popular forms are a limited company and a partnership.
The most simplified registering procedure. To start a sole trader business in the UK, you need to register your business with HM Revenue & Customs (HMRC). The main feature is a total personal responsibility for the company's obligations, including its property. The main responsibilities are filing an annual tax return, making social security contributions and paying income tax.
If you form a limited company, its finances are separate from your finances. The primary responsibilities are to follow the company’s rules, as shown in its articles of association, keep company records and report changes, and pay corporation tax. The main feature is that you can hire other people to manage your business, but you’re still legally responsible for your company’s records, accounts, and performance.
A joint type of business between two or more persons who bear equal personal responsibility for the company’s obligations, unless otherwise specified in the contract. Each share of the partner's profit is taxed. As a general rule, if one of the owners dies or goes bankrupt, the company must close.
This type of partnership is similar to a general partnership but has at least one general partner who runs the business and is personally liable for any business debts. The partnership also has at least one limited partner whose input is purely financial and who is only liable up to the amount they’ve contributed.
Limited liability partnership (LLP)
LLP enables one to run a business with 2 or more members. A member can be a person or a company, known as a “corporate member”. Each member pays tax on their share of the profits, as in an ordinary partnership, but isn’t personally liable for any debts the business can’t pay.
Private Limited Company (LTD)
This business type is a separate legal entity from the people that run it. Shares in the company cannot be traded publicly. How you set up your business depends on what sort of work you do. It can also affect the way you pay tax and get funding.
Public Limited Company (PLC)
PLCs differ from limited companies in that their shares may be traded publicly. You need to have a minimum share capital of £50,000, with at least 25% paid prior to start-up.
This type of business is designed to generate profit for charitable, social or public purposes, and not for distribution to shareholders. Social enterprises are structured similarly to limited companies and include charities, cooperatives, and community interest companies.
WHAT IS THE PROCESS OF REGISTERING A BUSINESS IN THE UK?
The steps to registering a business differ depending on the type of ownership.
For a Sole Trader
You have to inform HMRC that you pay tax through Self Assessment, a special service used to collect Income Tax, because you’ll need to file a tax return every year.
For Limited companies
You need to register an official address and choose a SIC code — this identifies what your company does. SIC code is a Standard Industrial Classification of economic activities from which you have to select your company’s nature of business.
For a Partnership
You need to choose a “nominated partner” responsible for managing the partnership’s tax returns and keeping business records. Also, it is obligatory to register with HM Revenue and Customs (HMRC).
For a Limited Partnership
You have to:
For a Limited Liability Partnership
You can register in three ways:
For Private Limited Companies
You have to:
For Public Limited Companies
You have to:
For Social Enterprises
You can register as a:
To save time and get rid of unnecessary bureaucracy, you can use our partner’s incorporation service. Osome helps entrepreneurs register their company, manage their bookkeeping, get immediate access to digitised and stored documents in the cloud, integrate their Osome account with their bank and get daily updates and more. All this is achieved through a mix of technology and professional accounting with 24/7 instant communication.
Immigram offers support and guidance every step of the way and a £30 discount to our clients.
To be eligible for this service, the country of your residence must not be included in this list. If it is, you can still set up a business in the UK once you become a British resident via the Global Talent Visa.
To begin the incorporation process, please fill in the form.
WHAT ARE THE TYPES OF COMMERCIAL INSURANCE IN THE UK?
In addition to worries about the success of their chosen business activities, owners of commercial premises are concerned about whether they will be able to financially cope with all sorts of unforeseen events such as fire, robbery, property damage, and more. At first, you need to make sure that you have the right level of insurance within the law in order to protect your business.
Note that if you are an employer, you sometimes need to buy insurance. For example, in the UK, employers with 50 or more full-time employees must provide health insurance to 95% of their full-time employees. To figure out whether you need insurance or not, we highly recommend you to contact a lawyer who knows all these subtleties.
WHAT ARE THE MAIN TYPES OF TAXES IN THE UK?
The UK tax system is structured so that those with higher incomes pay a higher rate. The good news is that non-UK residents only pay on income earned within the UK.
The basic UK taxes include:
The main UK government department responsible for the collection of taxes is called Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC). In order to be eligible for paying taxes you need to get a British address to which documentation will be sent. For your business you can buy a virtual address and use it for official purposes, including a company registration or paying taxes. Under the UK law, there is no obligation to work from your registered address.
For non-citizens, the UK tax system may seem confusing, but our team has prepared detailed information about each type of taxation and tips on calculating and paying them. Be sure to check out our article on taxes.
WHAT DOCUMENTS DO I NEED TO PROVIDE TO OPEN A BUSINESS BANK ACCOUNT?
There is no legal requirement for sole traders, partnerships, freelancers to have a separate business account. Nevertheless, it is highly recommended to do so. Meanwhile, limited companies, social enterprise companies and registered charities need to have a separate UK business bank account.
For sole traders, partnerships, and freelancers
You’ll usually need to provide the following documents at a bank:
For limited companies
You’ll usually need to provide the following documents at a bank:
Business banking can be confusing especially for foreigners. One of the great solutions to facilitate the banking process is an automated assistant ANNA*.
ANNA is a UK app-based business banking provider. The platform helps startups, aspiring entrepreneurs, and freelancers to manage their finances, accountants, and taxes.
ANNA Money is the business current account for startups, small businesses and sole traders. It provides a seamless business account that makes sending and receiving money simple, as well as ensuring that invoices are sent and paid on time. ANNA will calculate the amount you owe HMRC according to your tax profile and transactions you have on your ANNA account and send you reminders about upcoming HMRC requirements.
All ANNA services are free while you’re starting up. After that, how much you pay depends on how much you use ANNA. If you don’t use your account one month, you don’t pay anything the next one.
To use ANNA for free for the first 3 months don't forget to enter the promo code IMMI001 during setup in the app.
* Available only for UK residents.
HOW DO I EMPLOY STAFF?
The steps are as follows:
1) Register as an employer with HMRC
It can take up to 5 working days to get your pay-as-you-earn (PAYE) reference number, and you can’t register more than 2 months before you start paying people.
2) Get employers’ liability insurance
As soon as you become an employer, you’ll need employers’ liability (EL) insurance. This will help you in the event of an employee becoming injured or ill because of the work they do for you. You can be fined £2,500 every day you are not properly insured. Check to see if your insurer is authorised by looking at the Financial Conduct Authority register or contact the Financial Conduct Authority. You may want to use an insurance broker to help you buy EL.
3) Check your employees’ right to work
Make sure that your new employees have the legal right to work in the UK. To prove this, you’ll need a form of identification accepted by HMRC. You can check the applicant’s right to work online, if they’ve given you their share code –– check the applicant’s original documents.
4) Ensure social security
This can be done by preventing discrimination, by making sure workers with disabilities are not substantially disadvantaged, by keeping employee data and information safe, by providing fire safety in the workplace and health and safety regulations.
5) Make pension contributions
Your automatic enrolment duties under workplace pensions law begin on the day your first member of staff starts working for you.
First, assess your staff to see if they meet the age and earnings criteria to be put into a pension scheme. Then you must write to all your staff, within six weeks of your duties start date, to tell them how automatic enrolment applies to them. Lastly, within five months of your duties start date, you must complete a declaration of compliance online to state how you’ve met your legal duties.
Use the online tool to figure out what exactly you need to do and to find out about your ongoing duties.
6) Agree on a contract and salary
When someone accepts a job offer they have a contract with you as their employer. You have to check what the National Minimum Wage is for different ages and for different types of work. You also have to check what to include in a contract and agree to a written statement of employment particulars.
7) Tell HMRC about your new employee
You must inform HMRC on or before your employee’s first payday. Follow the instructions here.
CAN I GET BUSINESS FINANCE AND SUPPORT FROM THE UK GOVERNMENT?
Aspiring business entrepreneurs in the UK can get help and support from the government in terms of UK business grants and loans or get advice and financial help from government-backed schemes about finances, taxation, and business planning.
You can also get help with:
You can also speak to an adviser on webchat about support for your business.
WHAT ARE THE BUSINESS RATES?
If you occupy commercial property, you are most likely liable to pay a commercial fee for that property. Commercial/business rates are based on the appraised value of commercial property, which in turn reflects the rental value of that property.
What are business rates charged on
You’ll probably have to pay business rates if you use a building or part of a building for non-domestic purposes. Business rates are charged on most non-domestic properties, like:
Your local council will send you a business rates bill in February or March for the following tax year. You can also estimate your business rates bill.
Moreover, you may be able to get a discount from your local council on your business rates if you’re eligible for one or more business rates relief schemes.
For help with your property’s rateable value, you can contact the Valuation Office Agency (VOA). For help with your business rates bill (for example, to pay in instalments) or rate relief, you should contact your council.
A business licence provides permission for certain types of business activities. Licences aren’t required for many businesses, unless you’re involved in certain business activities such as:
How to get a business licence in the UK?
There are different requirements for each type of business licence. So, the first thing to do is visit the Government website’s licence finder tool. This is the easiest way to figure out if you need a licence, which licence you need and where to apply for it.
PATENTS, TRADE MARKS, COPYRIGHT AND DESIGNS
There are different types of intellectual property rights, including patents, trade marks, design and copyright in the UK that need to be registered and protected.
1) You can use a patent to protect your invention. It gives you the right to take legal action against anyone who makes, uses, sells or imports it without your permission. To be granted a patent, your invention must be new and inventive. Apply for a patent here.
2) Copyright protects your work and stops others from using it without your permission. You get copyright protection automatically—you don’t have to apply or pay a fee. There isn’t a register of copyright works in the UK. You can mark your work with the copyright symbol (©), your name and the year of creation. Your work could be protected by copyright in other countries through international agreements.
3) You can register your trade mark to protect your brand, for example the name of your product or service. You can apply for a trade mark here. When you register your trade mark, you’ll be able to:
TAKING PAYMENT FROM CUSTOMERS
If you sell a customer a product or a service, you need to give them an invoice (bill) by law if both you and the customer are registered for VAT (a business to business transaction). An invoice is not the same as a receipt, which is an acknowledgement of payment.
Your invoice must include:
If you’re a sole trader, the invoice must also include:
If your company is a limited company, you must include the full company name as it appears on the certificate of incorporation. If you decide to put names of your directors on your invoices, you must include the names of all directors.
GETTING PAID IN THE UK
As an employee getting paid in the UK, there are different ways that you can receive your earnings. Payroll can be run monthly, which is usual in the U.K., or on a weekly basis, if preferred. Part of running the payroll includes collecting U.K. payroll taxes from employees’ salaries.
Electronic signatures are totally legal and admissible. More and more businesses and individuals are using, or are seeking to use, electronic signatures with an increasing number of Government services available digitally. E-signatures can prove the origin of the communication or document, show whether a message has been altered and ensure messages remain confidential.
Electronic signatures deliver a way to sign documents in the online world, much like one signs a document with a pen in the offline world. Electronic signatures come in many forms, including:
The following transaction types generally are eligible for the use of electronic signatures:
DOES A FOUNDER OF A STARTUP NEED AN EMPLOYMENT CONTRACT?
If the founders of a startup devote part or full time efforts to that company, and most likely salaries, it is best they have employment agreements with the company just like everyone else. It is highly recommended to sign an employment contract if you have co-founders. If you start your company with co-founders, you should agree early on about the details of your business relationship in order to avoid any misunderstandings in the future. Here are the key deal terms your written founder agreement needs to address:
It is always better to have a formal employment contract to be on the safe side, whether you are a founder, co-founder or an employee.
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