Choosing the business vehicle

Produced by a Tolley Owner-Managed Businesses expert

Owner-Managed Businesses

Guidance

When a person decides to start in business, consideration should be given as to the most suitable type of entity for the business. This decision will depend on legal, commercial and administrative factors, as well as taxation.

When advising on which type of business vehicle to choose, this guidance note summarises the main tax considerations in deciding which business structure is appropriate for the business owner. A comparison document which summarises both practical and tax differences can be found in the Starting the business ― overview guidance note, together with checklists of the various issues to consider.

Differing rates of tax

Rates of tax and NIC are different depending on the type of business vehicle used. In 2025/26 and 2024/25, the following paragraphs summarise the rates which apply.

Sole trader or partner in a partnership

A sole trader or partner in a partnership will pay income tax at rates of 0%, 20%, 40% and 45% (for both 2025/26 and 2024/25 ) on the profits generated by the business they run, depending on the level of profits they generate

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

Popular Articles

Value Added Tax

Exemption ― overview ― items exempt from VAT in the UK

Exemption ― overview ― items exempt from VAT in the UKVAT exemption: list of supplies exempt from UK VATThe goods or services that are exempt from VAT are listed under various group headings within VATA 1994, Sch 9, Pt II.It is important to remember that not all supplies that come within a heading

14 Jul 2020 12:45 | Produced by Tolley Read more

Corporation Tax

Research and development (R&D) relief ― overview

Research and development (R&D) relief ― overviewThis guidance note provides an overview of the research and development (R&D) tax reliefs for companies.See the Research and development tax relief summary diagram which summarises the R&D tax relief.See also Simon’s Taxes D1.401.For a factsheet which

14 Jul 2020 12:22 | Produced by Tolley in association with Will Sweeney Read more

Value Added Tax

Holding companies ― VAT status of activities

Holding companies ― VAT status of activitiesThis guidance note examines how to determine the VAT status of a holding company’s activities. In particular, it looks at:•when a holding company is or is not in business•if a holding company is in business, whether its activities are exempt or taxableThe

14 Jul 2020 17:13 | Produced by Tolley Read more

��Ƶ