The United Kingdom is ranked as the sixth-largest economy globally, with a GDP of $2.83 in 2019.¹ The United Kingdom has been an attractive country to start a business for both citizens, and immigrants, both in time past and today.
However, different changes have begun to occur in the UK, making opening a business in the UK a challenge. Nevertheless, foreigners can own a business in the UK today, with a well-executed plan and enough room for optimism.
One of the challenges that foreigners face in the UK is the immigration system; the recent changes in the immigration system of the UK has made it difficult for foreigners to get the appropriate legal document required to start a business in the United Kingdom.
In this article, you will learn how to start a company in the UK for foreigners, how to register your company or business with the government, and the necessary information to get your company off the ground.
Before starting a business or launching your idea as a foreigner in the UK, you need to consider the following steps:
Getting a visa is dependent on your nationality; According to gov.uk, there are over 40 countries that need a visa before entering into the UK. You will need a visa before entering the UK, if you are from any of those countries, and more so, a visa to allow you to live legally in the UK. You may consider getting a work visa before starting a business.²
Applying for a visa may seem difficult; however, it is easy with just the right information. There are different types of visas, and it is therefore important that you ask questions from your travel agent and apply for the correct visa. UK visas are usually declined or accepted within three weeks.
The immigration system in the UK is point-based, and it is divided into two tiers. Tier 1 is meant for entrepreneurs, investors, and highly skilled workers looking to open businesses in the UK. The requirement or the tier 1 visa is quite strict, and you must have at least £50,000 in investment capital or have invested approximately £50,000 in the UK in the last 12 months. However, if you have not invested in time past, then the money must come from:³
- A venture capital business registered with the FCA
- The UK funding department for startups and business owner
- An endorsed UK funding competition for entrepreneurs
Before starting your business in the United Kingdom as a foreigner, you must find out the kind of business structure that exists and thrives in the UK. Find out about the legal position and tax payment of every business structure.
After getting a visa, which makes you legally eligible to start your own business in the UK, the first step is to create a legal structure. You must note that the legal structure of your business affects the amount of tax you pay. There are four categories of business structures in the UK:
- Sole trader: Sole trader is the simplest type of business structure in the UK. There is no difference between the owner of the business and the business. To start a sole trader business in the UK, you need to first register your business with HMRC before the end of the year.
- Partnership: Partnership business involves more than one person managing the business. To open a partnership business, you need to register with HMRC, and both parties must be involved with registering the business.
- Limited liability partnership (LP)
- Limited company
The essence of opening a bank account as a non-resident is to optimize international transactions and make your business in the UK better. However, registering a UK business bank account for non-residents may be challenging, but it is absolutely necessary. United Kingdom banks have no specific restrictions that may limit immigrants from opening a business bank account for non-residents. However, the British anti-money laundering policy makes the bank opening process a bit lengthy.
There are three major ways to register a business bank account in the UK for foreigners:
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Residency: Before opening a business bank account, you will need to submit the details of your residence in the UK. The essence of this is to prove your national residence to the bank. You will also need to show the bank a utility bill that contains your name. You must note three things before choosing this method; you must have stayed in the UK for at least half a year, you must have your residential property, and your residence must be different from your office's address. If you do not fall into any of these categories, it is advised that you look out for other options for non-residents.
International banking: Another way to open a business bank account is with a reputable bank in the UK, where you are required to use your international documents. Ensure that you use a valid passport, a national identification card, and proof of residential address in the UK. You may ask for British banks' recommendations to open an account with their terms and conditions. Many banks in the UK allow non-residents to open an account; banks such as Barclays and Llyod.
After selecting your legal structure, you need to register your business with a UK tax corporation. Forfeiting your tax payment may lead to eradicating your business, which may also affect your stay in the UK. After registering your company, the organization responsible for handling the national register of companies- Her Majesty’s Revenue and Customs HMRC will send you the information needed to register your business as it relates to tax matters. The following information will be needed:
- Company’s registration number
- Start date of work
- The end date when accounts will be prepared annually
After registering your business for tax corporation, ensure that you keep records of the following:
- Annual Accounts of the company, including the profit and loss
- Purchase and sales invoices
- Order and delivery notes
- Bank statements, checkbooks, and electronically evidence of payment received
- Cash books
- Credit notes and debit notes
- VAT records
- Payroll records
- Any other relevant business information
Finally, opening a business in the UK may be challenging, however, the UK is a vibrant place where business can flourish. If you meet the visa requirement, that may be a great place to start your business. You do not have to give up your ambition of operating a business in the UK, with the information in this article, you may have just set yourself up for success!
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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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