How Limited Companies Are Taxed in the UK: A Guide to Maximising Your Tax Efficiency

If you’re a business owner, contractor, or entrepreneur, you’ve probably wondered whether setting up a limited company could improve your tax position.

Many people have heard that limited companies offer tax advantages. Still, it’s unclear how they work or whether they’re right for your situation.

In this blog, we’ll break down how limited companies are taxed in the UK. Then go on to discover how this differs from personal tax, and the key factors you need to consider when deciding whether to use a limited company for tax efficiency. By the end, you’ll better understand the benefits and drawbacks of making an informed decision.

How Limited Companies Are Taxed

Knowing how they are taxed is essential to understand whether a limited company is right for you. When you operate a limited company, your business is treated as a separate legal entity from you. This means the company is subject to its taxes, primarily through Corporation Tax. Let’s dive into the details:

Corporation Tax

When you run a limited company, you’ll pay Corporation Tax on the company’s profits. This is one of the key differences between being self-employed (where you’re taxed on your…