Tax · 8 min read
The UK taxes a subsidiary pays
Every UK tax an overseas-owned company meets, on one page: corporation tax at 19–25% and the associated-companies rule, VAT, PAYE and employer National Insurance, business rates, stamp duty, withholding tax on dividends (none), interest and royalties (20%), transfer pricing and audit thresholds — with when each is due.
Key points
- Corporation tax is 25% above £250,000 of profit and 19% below £50,000 — but both limits are divided by the number of associated companies worldwide plus one, so most subsidiaries pay 25%.
- The UK charges no withholding tax on dividends to a parent in any country; 20% applies to interest and royalties unless a treaty rate is claimed in advance.
- VAT is 20%; UK-established businesses register at £90,000, non-established businesses from the first sale.
- Employer National Insurance is 15% above £5,000 per employee; the minimum employer pension is 3% of qualifying earnings.
At a glance
| Tax | Rate | When |
|---|---|---|
| Corporation tax | 19%–25% of taxable profit | Pay 9 months + 1 day after year end; return 12 months after |
| VAT | 20% (5% / 0% / exempt for some supplies) | Quarterly return and payment 1 month + 7 days after quarter end |
| Employer National Insurance | 15% of each employee’s pay above £5,000 a year | Monthly by the 22nd, via PAYE |
| Employee income tax and NI (withheld) | 20%–45% tax; 8%/2% NI | Reported every payday (RTI); paid monthly |
| Workplace pension (employer) | Minimum 3% of qualifying earnings | Each payday |
| Business rates | Set by local council on commercial premises | Monthly instalments, if you have premises |
| Stamp duty on share transfers | 0.5% of consideration over £1,000 | Within 30 days of transfer |
| SDLT on property | Tiered; surcharges for companies and non-residents | Within 14 days of completion |
| Withholding on dividends paid abroad | 0% | — |
| Withholding on interest and royalties paid abroad | 20% unless treaty rate claimed in advance | Quarterly return CT61 |
| Import VAT and customs duty | VAT 20% (postponed accounting available); duty by tariff code | At import / on VAT return |
| Apprenticeship Levy | 0.5% of pay bill over £3m | Monthly via PAYE |
Corporation tax
Charged on the UK company’s worldwide taxable profits. The main rate is 25% on profits above £250,000; the small profits rate is 19% on profits up to £50,000; between the two, marginal relief produces a sliding effective rate. The catch for groups: both limits are divided by the number of associated companies plus one — companies under common control anywhere in the world. A UK subsidiary with four sister companies has limits of £10,000 and £50,000, so it pays 25% on almost everything. Use the calculator. Tax is paid nine months and one day after the year end; the CT600 return, with accounts and computations, is due twelve months after. Companies with profits over £1.5m (again divided by associates) pay in quarterly instalments.
Getting profits home
The UK charges no withholding tax on dividends, to any shareholder in any country. Interest and royalties paid abroad carry 20% withholding unless the treaty rate — often 0% — is claimed in advance through HMRC’s Double Taxation Treaty Passport scheme or a treaty clearance. Management charges are not subject to withholding but must be at arm’s length.
Transfer pricing and intercompany charges
Small and medium-sized groups — fewer than 250 employees and either under €50m turnover or under €43m balance sheet, measured across the whole group — are exempt from the UK’s formal transfer pricing rules. HMRC can still challenge charges that are not at arm’s length, and undocumented intercompany charges are the first thing disallowed in an enquiry. Larger groups must keep full documentation. Either way: write the intercompany agreement before the first invoice.
VAT
Standard rate 20%, with 5%, 0% and exempt categories. A UK-established business registers once taxable turnover exceeds £90,000 in twelve months; a non-established business — which a UK Ltd run entirely from abroad usually is — registers from its first taxable UK sale. Returns are quarterly under Making Tax Digital. Importers need a GB EORI and can use postponed VAT accounting. Full VAT guide.
Payroll taxes
Employers deduct income tax (20%, 40%, 45%) and employee National Insurance (8% then 2%) from pay and report it to HMRC every payday. On top, the company pays employer National Insurance at 15% on each employee’s earnings above £5,000 a year, reduced by the £10,500 Employment Allowance (once per group). Auto-enrolment requires a minimum 3% employer pension on qualifying earnings. The Apprenticeship Levy applies only above a £3m pay bill. Employment cost calculator.
Property and transaction taxes
Business rates are a local tax on commercial premises — none if you have no UK premises. Stamp duty of 0.5% applies to share transfers over £1,000 (not to new share issues). SDLT applies to buying UK property, with surcharges for companies and non-resident buyers.
Audit
Not a tax, but often confused with one. A UK subsidiary needs a statutory audit if the worldwide group is not small — two of £15m turnover, £7.5m balance sheet and 50 employees — regardless of how small the UK company is. The auditor must be appointed before the year end.
What a typical subsidiary actually pays
A services subsidiary with £400,000 of UK revenue, two employees on £55,000 and £60,000 of profit, part of a group with three other companies: corporation tax ≈ £15,000 (25%, because the limits are divided by four); employer NI ≈ £15,000 less the £10,500 allowance ≈ £4,500; employer pension ≈ £2,900; VAT collected and paid over on sales to UK consumers, or reverse-charged by UK business customers; no withholding when profits are paid up. Roughly thirty filing dates a year keep it compliant — all of them here.
General information for overseas businesses considering the UK, correct to the best of our knowledge at the date shown. Not advice for your specific circumstances — rates and thresholds change, usually each April. Check with us or HMRC before acting on it.