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The Complete UK Tax Guide for Small Businesses (2025/26)
Everything a UK small business or limited company needs to know about Corporation Tax, Self Assessment, VAT, PAYE, National Insurance and Making Tax Digital — in one place.
Quick answers
What taxes does a UK small business pay?
UK small businesses typically pay Corporation Tax (limited companies) or Income Tax via Self Assessment (sole traders), plus VAT if turnover exceeds £90,000, PAYE and employer's National Insurance if they have staff, and Class 2/4 NI if self-employed. Your exact mix depends on your legal structure and activities.
What is the Corporation Tax rate for 2025/26?
For the 2025/26 tax year, Corporation Tax is 19% on profits up to £50,000 (small profits rate), 25% on profits over £250,000 (main rate), with marginal relief tapering the effective rate between those bands.
When is the VAT registration threshold reached?
You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect to exceed it in the next 30 days alone. You can also register voluntarily below the threshold to reclaim input VAT.
When is the Self Assessment deadline?
Online Self Assessment returns and any tax due must be filed and paid by 31 January following the end of the tax year (which runs 6 April to 5 April). Paper returns are due earlier, by 31 October.
Do all UK businesses need to follow Making Tax Digital?
All VAT-registered businesses must already follow MTD for VAT. MTD for Income Tax Self Assessment (ITSA) starts in April 2026 for sole traders and landlords with qualifying income over £50,000, then expands to lower thresholds in later years.
The Complete UK Tax Guide for Small Businesses (2025/26)
Running a small business in the UK means dealing with several different taxes, each with its own rules, deadlines and forms. This guide walks you through the full picture for the 2025/26 tax year, so you know what applies to you, when to file, and how to stay compliant with HMRC.
Which UK taxes affect your business?
The taxes you pay depend on your legal structure and activities:
- Sole trader or partnership — Income Tax via Self Assessment, Class 2 and Class 4 National Insurance.
- Limited company — Corporation Tax on profits, plus Self Assessment for the directors on any salary or dividends.
- Any business that crosses the VAT threshold (£90,000 in 2025/26) — must register for VAT.
- Any business with employees — must operate PAYE and pay employer's National Insurance.
Key tax rates for 2025/26
| Tax | Rate / Threshold |
|---|---|
| Corporation Tax (small profits, ≤£50k) | 19% |
| Corporation Tax (main rate, ≥£250k) | 25% |
| Income Tax personal allowance | £12,570 |
| Income Tax basic / higher / additional | 20% / 40% / 45% |
| VAT registration threshold | £90,000 |
| VAT standard rate | 20% |
| Dividend allowance | £500 |
| Class 1 employer NI (above £5,000 ST) | 15% |
| Class 4 NI (self-employed, £12,570–£50,270) | 6% |
Corporation Tax
If you trade through a limited company, you pay Corporation Tax on your taxable profits (turnover minus allowable expenses, capital allowances and reliefs). For 2025/26:
- 19% if profits are £50,000 or less (small profits rate).
- 25% if profits are £250,000 or more.
- Marginal relief tapers the rate between those thresholds.
Filing: submit a CT600 to HMRC within 12 months of your accounting period end. Payment: due 9 months and 1 day after the end of the period — that is, before the return is filed for most companies.
Self Assessment
Self Assessment is how HMRC collects Income Tax from sole traders, partners, company directors with untaxed income, landlords and people with significant savings or capital gains.
- Register by 5 October following the tax year you became liable.
- File online by 31 January (paper deadline is 31 October).
- Pay any tax due by 31 January, with payments on account by 31 January and 31 July if your bill exceeded £1,000.
VAT
You must register for VAT once your taxable turnover exceeds £90,000 in any rolling 12 months, or if you expect to exceed it in the next 30 days. You can also register voluntarily.
Common schemes:
- Standard accounting — charge 20% (or 5%/0%) VAT, reclaim VAT on purchases.
- Flat Rate Scheme — pay a fixed percentage of gross turnover; simpler but you can't reclaim most input VAT.
- Cash Accounting — account for VAT when invoices are paid, not raised.
All VAT-registered businesses must follow Making Tax Digital (MTD): keep digital records and submit returns via compatible software.
PAYE and employer's National Insurance
If you employ anyone — including yourself as a director taking a salary — you must operate PAYE. Each pay run you:
- Calculate Income Tax and NI on the gross pay.
- Submit a Full Payment Submission (FPS) to HMRC on or before payday.
- Pay HMRC by the 22nd of the following month (19th by post).
For 2025/26, employer's NI is 15% above £5,000 per employee, with Employment Allowance of up to £10,500 reducing the bill for eligible small employers.
National Insurance for the self-employed
- Class 2 is no longer compulsory but voluntary contributions can preserve State Pension entitlement.
- Class 4 is 6% on profits between £12,570 and £50,270, then 2% above.
Making Tax Digital (MTD)
MTD is HMRC's programme to digitise tax records and reporting:
- MTD for VAT — already mandatory for all VAT-registered businesses.
- MTD for Income Tax (ITSA) — phased in from April 2026 for sole traders and landlords with income over £50,000.
You'll need software that keeps digital records and submits updates directly to HMRC.
Allowable expenses and capital allowances
You can deduct revenue expenses (day-to-day running costs — wholly and exclusively for business) from your profits, and claim capital allowances on assets like equipment, machinery and certain vehicles. The Annual Investment Allowance (AIA) lets most businesses deduct 100% of qualifying plant and machinery up to £1 million.
Key deadlines at a glance
- Corporation Tax payment: 9 months + 1 day after period end.
- CT600 filing: 12 months after period end.
- Self Assessment online: 31 January.
- Self Assessment paper: 31 October.
- VAT return: 1 month + 7 days after each quarter.
- PAYE monthly payment: 22nd of the following month.
- P60 to employees: 31 May.
- P11D / P11D(b): 6 July.
Penalties for getting it wrong
HMRC charges automatic penalties for late filing and late payment, plus interest. The new points-based system for VAT and Self Assessment means each late return adds a point — once you hit the threshold, a £200 penalty applies.
Where to go next
- For a worked Corporation Tax calculation, see Example: Corporation Tax Calculation.
- For a VAT walkthrough, see Example: VAT Return on the Flat Rate Scheme.
- For all current rates in one place, see Reference: UK Tax Rates 2025/26.
This is general guidance for the 2025/26 UK tax year and is not personal tax advice. Always check the latest figures on GOV.UK or speak to a qualified accountant for your situation.
Frequently asked questions
Related guides
Corporation Tax Explained: Rates, Computation and CT600 Filing
How Corporation Tax works for UK limited companies in 2025/26 — rates, marginal relief, what to deduct, and how to file your CT600.
Self Assessment Tax Returns: A Complete Guide
Who needs to file Self Assessment, how to register, what goes on the SA100, deadlines, payments on account and how to avoid common mistakes.
VAT Registration and Returns: A Practical Guide
When to register for VAT, choosing between standard, flat-rate and cash schemes, filing returns under MTD, and the rules every UK business needs to know.
PAYE and Payroll for UK Employers
How PAYE works for UK employers in 2025/26 — RTI submissions, tax codes, NI categories, paying HMRC and end-of-year reporting.
National Insurance Classes Explained
Class 1, 2, 3 and 4 National Insurance for UK workers and the self-employed in 2025/26 — rates, thresholds and what each class buys you.
Making Tax Digital (MTD) Explained
What MTD means for VAT and Income Tax, who's affected, when the rules apply, and how to choose compatible software.
Reference: UK Tax Rates 2025/26
All the headline UK tax rates and bands for 2025/26 in one place — Income Tax, NI, Corporation Tax, VAT, dividends, CGT.
Reference: Key UK Tax Deadlines
A calendar of the key UK tax filing and payment deadlines small businesses and individuals need to track.