Forms of business vehicle—tax summary
Forms of business vehicle—tax summary

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Forms of business vehicle—tax summary
  • Sole traders
  • Trading Profits
  • Trading Losses
  • Capital Gains
  • Capital Allowances
  • Value Added Tax
  • National Insurance contributions
  • Tax administration
  • Partnerships
  • More...

When one or more individuals decide to start a business, they have a choice as to what vehicle they operate that business through. In addition to the commercial and legal reasons for that choice (see Practice Note: Forms of business vehicle), the tax treatment of each different form of vehicle will often be a decisive factor in whether it is appropriate for carrying on a particular business. Before assessing how tax issues influence the choice of business vehicle, it is useful to understand the basics of how each type of vehicle is taxed.

This Practice Note summarises the tax implications of running a business as a:

  1. sole trader

  2. general partnership

  3. limited partnership

  4. limited liability partnership, and

  5. limited company

For the sake of simplicity, this Practice Note assumes that one or more UK resident unconnected individuals decide to establish a trading business in the UK on a commercial basis. This is a summary of the general issues and does not cover the detailed rules or application of them to specific circumstances.

A very brief summary of this information is set out in tabular form in: Choice of business vehicle—tax comparison table.

For all the current (and previous year) tax rates, see Practice Note: Key UK business tax rates, thresholds, allowances and rates of interest.

Sole traders

Trading Profits

Any profits generated by a sole trader are included as part of the individual’s

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