Sole Trader and Limited Company: How can Foreigners Set Up A Business in the UK

The right legal business structure in the UK is important because it gives the business its own legal identity. It also impacts the amount of tax payment and personal liability of the business. The UK government statistics declared that the business population comprises 3.2 million sole proprietorships in 2021. It is the most popular legal form of business in the UK. Although a complex process, many local businesses have set up shop with ease or were able to transition from sole trader to limited company with the right preparation, planning and compliance with the government. But what about foreigners or those who are based overseas, especially traders from outside the EU or EEA but want to build a business in the UK? 


Expats starting a business in the UK 

Expats who are interested in registering as a self-employed individual in the UK must identify the different legal structures for businesses. Some of the common legal forms are Sole Trader, Partnership, Limited Company and Limited Liability Partnership. Next, find out your legal status. EU citizens or those who are from Switzerland, Norway, Iceland or Liechtenstein living in the UK before January 1, 2021 are eligible for the EU Settlement Scheme. However, other foreign citizens will need to apply for a visa. 

There are different types of visa available for entrepreneurs: 


  • Startup Visa

    Apply for a startup visa if you already have a history of working with or assisting UK businesses or have an endorsement from a UK higher education institution or organisation. The application fee starts at £363 and is valid for two years. Startup visas cannot be extended but you can apply for another visa when it expires.


  • Innovator Visa

    If you’re an entrepreneur who’s really keen on setting up a unique business and is already endorsed by an approved body, then this is the right visa for you. The innovator visa costs £1,021and is valid for three years that is renewable before it expires. The requirements include:
  1. £50,000 investment fund and a statement where you got the money. 
  2. A personal sufficient fund for your stay in the UK
  3. £1,270 in your bank account 28 days before applying for a visa
  4. B2 level in English of the Common European Framework of Reference for Languages (CEFR)


  • Investor Visa

    The investor visa is for foreign entrepreneurs who can invest £2 million in the UK economy.  You need to pay £1,623 and submit your application at least three months before coming to the UK. It is valid for a maximum of three years and four months and is eligible for extension for another two years provided that you still meet the criteria.  


When you’ve already accomplished your visa and have decided what business structure you want for your business, register with the HM Revenue and Customs for tax compliance. There is no fee when you register as a sole trader while a limited company will need to pay £12 online or £40 by mail to register with Companies House.

Next, check if you need to register for permits and licences for your type of business. If your business includes having activities such as street parties and playing, you need to register for a licence. There are also extra rules if you’re engaged in distance or online selling but it requires both information to be declared to the government. 


Foreign companies setting up a UK branch 

Foreign companies who want to open a branch or subsidiary in the UK must register with Companies House as an overseas company provided that you already have a place to conduct your business anywhere in the country. Fill out the OS IN01 and send it to Companies House within one month of opening for business. The registration fee costs £20.


Managing your business in the UK as an expat

Here are six important things to keep in mind to keep your business running smoothly in the UK: 


  • Tax and auditing purposes

    Sole traders must keep a record of their official accounts, earnings, taxes.


  • Business Bank Account

    Limited companies must have their separate UK business bank accounts while sole traders aren’t required to have one. In addition, limited companies must provide their company details such as a list of directors, registration number and annual turnover to Companies House.


  • Taxation

    All legal businesses must register to the HMRC for tax purposes. Sole traders are taxed based on their profits. Limited companies, on the other hand, pay a corporate tax that is 20% on profits minus any allowances or exemptions.


  • Business insurance

    Business insurance is required by the law and protects your business. There are different types of business insurance:           
  1. Employer’s liability insurance – This type of insurance is for companies with employees. It covers employee illness or injury related to the job.
  2. Public liability insurance – This type of insurance is for businesses that organise public activities. It covers injury and damage to the property.
  3. Professional indemnity insurance  – This type of insurance is for certain professions such as private consultants and accountants to protect you against financial and reputational harm.


  • Staff recruitment

    The company must register to the HMRC if the business requires hiring employees provided that the workers have a legal permission to work in the UK especially if they are expats. The business is required to pay the minimum wage, social security and social contributions.


  • Government assistance

    Foreign companies can ask for assistance to the Department for International Trade to help them set up their business in the UK. 


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