Generally, all goods imported into the UK are subject to the UK Global Tariff (UKGT). A tariff is a tax or duty imposed by one country’s government on goods and services imported from another country.

The tariff makes imported goods and services more expensive to buy because the importers have to recoup the tax and duty paid.

Protect local businesses by giving them a better chance to compete in the industry. They can charge a lower price to increase demand. Imported goods and services become more expensive
Protect domestic manufacturers and employ local people Importers may stop importing if demand is low because they have to charge expensive price tags, which leads to loss of income for the government.
More money for the government through collecting import taxes and duties.

No Tariff to pay

There are situations where the UK global Tariff does not apply to your imported goods.

Free Trade agreement

You are importing goods from a country that has a trade agreement with the UK. For example, The UK has already signed a free trade agreement with Japan on 23 October 2020. You can read more about the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) on GOV.UK website.

Tariff Suspension

The UK helps businesses to remain competitive in the global market by suspending import duties on certain goods. Usually, these goods are used in domestic production. For example, The Uk suspends all tariffs on a group of medical items critical in the response to COVID-19 on 1 January 2021. The suspension is for 12 months on all goods listed by the World Health Organisation (WHO) as critical goods would have 0% duty. For example, surgical gloves under the commodity code of 40151100 are 0% duty.

Imports from country under the UK Generalized Scheme of Preferences

The UK reduces or removes import tariffs on imports from developing countries classified by either the United Nations (UN) or the World Bank as low-income and lower-middle income countries. For example, The UN classified Madagascar as the least developed country. Imports from Madagascar have quota-free access and nil rates of import duty.

Department for International Trade

If you would like to export or import goods or services into and out of the UK, the UK Department for International Trade (DIT) can help you. The DIT provides the following services to businesses wanting to export out of the UK or import from overseas.

  • Create an export plan
  • Find an export market
  • Choose a route to market
  • Get export finance
  • Manage payments for export orders
  • Prepare to do business in a foreign country
  • Prepare for export procedures and logistics
  • Sell services overseas
  • Manage risks of bribery and corruption

There are UK Department for International Trade offices worldwide and also DIT offices around the UK that you may contact to ask for help.

Use Trade Tariff Tool to find Commodity code for Customs declaration

You would require to find the right commodity code for your goods to complete your customs declaration paperwork. Your commodity code will tell you the correct Customs Duty and import VAT to pay.

You may use the HMRC Trade Tariff tool to look up your commodity code. For example, a commodity code for the import of unworked Sapphire is 7103100000. The goods are subject to 20% VAT and 0% duty if it is subject to a third country duty.

You can handle your customs declaration paperwork yourself or you may hire freight forwarders, customs agents or brokers, or fast parcel operators to handle your customs declaration paperwork for you. The person or business you hire to represent you must be established in the UK.

Usually, duty must be paid before your goods can be released unless you have a duty deferment account with HMRC.

Import goods under your company’s name

You must ensure all the legal filings such as Confirmation Statement, company accounts, and corporation tax returns are up to date with Companies House and HMRC if importing using your company’s name.

Budget 2021

The UK government announced at the Budget 2021 the following subject matters and will legislate them in Finance Bill 2021.

Corporation tax

The corporation tax rate remains at 19% from 1 April 2022 and the rate will increase to 25% from 1 April 2023.

Coronavirus Job Support Scheme

The Coronavirus Job support Scheme is extended to 30 September 2021 across the UK.

Self Employment Income Support Scheme

The self-employment income support scheme is extended to 30 September 2021. People who have filed their self-assessment return in 2019/2020 may be able to claim for the first time.

One-off cash grants of £18,000

A new restart grants for hospitality, accommodation, leisure, personal care and gym businesses in England. If your business falls into these sectors you may entitle to the one-off cash grants of £18,000.

VAT cut for some businesses

VAT to 5% for hospitality, accommodation and attractions is extended to 30 September 2021 thereafter the rate will increase to 12.5% till 31 March 2022.

Statutory Sick Pay (SSP)

If your business have paid staff for self isolating or sick during this pandemic, you can claim the statutory sick pay up to two weeks from the UK government.

Property tax – stamp duty

The stamp duty land tax temporary relief is extended to 30 June 2021. First-time buyers continue to enjoy the tax-free amount of up to £500,000 on a property purchase cost.

The Budget 2021 have been very helpful to help UK businesses to bounce back from this pandemic.

Sign up for Making Tax Digital (MTD)

HMRC requires all VAT registered businesses to sign up for Making Tax Digital (MTD) by April 2022. Businesses making sales of more than £85,000 should already be adopting the MTD rules.

After you enrolled to the MTD programme, your business must do the following:

  • Sign up to MTD and follow the rules.
  • Keep digital records
  • Submit your VAT returns using MTD compatible software.

For businesses with sales below £85,000 have the option to sign up for the MTD programme voluntarily before April 2022. However, even if your business is not yet signed up for Making Tax Digital (MTD) programme, you are required to use MTD compatible software to file your VAT returns from 8 April 2021.

After this date, HMRC will no longer accept VAT returns submission using EXtensible Markup Language (XML) software. The reason for this change is that HMRC is migrating to a new IT system as part of their digital transformation and this new IT system does not accept XML VAT returns submissions.

Submit your VAT returns using Making Tax Digital (MTD) compatible software

If you do not yet sign up for Making Tax Digital (MTD) after April 2021, you can use the HMRC Business Tax Account to submit your VAT returns.

You would require your Government Gateway user ID and password you created when you first registered a business tax to login into your HMRC Business Tax Account.

Alternatively, you may appoint an accountant to submit your VAT returns for you.

Software providers

HMRC has communicated with all software providers that provide XML submission platform for this change and your software provider would communicate with you what are their plan on this migration.

Surcharges and penalties for non compliance with MTD rules

HMRC will issue surcharges and penalties if your business failed to comply with the Making Tax Digital for VAT rules. For example, if you do not use your HMRC Business Tax Account to submit your VAT return and you send in a paper VAT return to HMRC, you will get £400 penalty.

Click here for more information about MTD surcharges and penalties.

Besides, making sure your VAT registered business comply with MTD rules, if your business is a limited company, make sure your confirmation statement and company accounts are submitted by the deadlines to Companies House to avoid a late filing penalty.

Dividend from small company

Many entrepreneurs set up a limited company for business because it is easy, quick and affordable to incorporate a limited company in the UK. One of the ways they can withdraw money from their companies is through dividends payments. You must declare the dividend from your small company in your self-assessment return.

Before declaring your dividend

Generally, you can only declare a dividend from your small company when you have sufficient profits available for distribution after paying corporation tax.

You will include the dividend declared in your company’s profit and loss account and also in your balance sheet as the dividend payable if the dividend will be paid after the accounting year ended.

Dividend Received

For example, you are the sole director and shareholder of your limited company. Your company made a profit of £100,000 before corporation tax and after your director’s salaries a total of £50,000. The corporation tax rate is 20%. You would like to withdraw £8,000 from your company.

Profit and loss account2021
Profit before tax£100,000
Less: corporation tax @ 20%(£20,000)
Profit after tax£80,000

In this instance, you can pay yourself a dividend of £8,000. Correspondingly, you must declare this dividend received from your limited company in your self-assessment return. You must register with HM Revenue and Customs to get your Unique Tax Reference (UTR) number for filing your self-assessment return.

Dividend allowance

The great news you do not pay tax on the full amount of dividend of £8,000 received. The UK government is kind, understanding and generous to the taxpayers.

Tax yearDividend allowance
6 April 2020 to 5 April 2021£2,000
6 April 2019 to 5 April 2020£2,000
6 April 2018 to 5 April 2019£2,000
6 April 2017 to 5 April 2018£5,000
6 April 2016 to 5 April 2017£5,000
Source: GOV.UK

Tax on dividend

Your company do not pay tax on the dividend you received but you do. The tax you must pay on your dividend received is depending on your total earned income for the tax year and your income tax band. Please note that the income tax band is different from the dividend tax band.

Dividend tax bandTax rate
Basic rate7.5%
Higher rate32.5%
Additional rate38.1%
source: GOV.UK

Calculate tax on dividend

Dividend received£8,000
Total earned income for the tax year£58,000
Less: Personal allowance for 2020/2021(£12,500)
Taxable income£45,500
Tax on:
Salary at the basic rate of 20% (£45,500 – £8,000)£7,500
Dividend at the basic rate of 7.5% (£8,000 – £2,000)£450
Total tax bill£7,950

Confirmation statement

Another important document you must prepare for your company is your confirmation statement at least once every 12 months and submit it to Companies House. Failed to file this document may result in your company being struck off the Companies House register.

If you require help with your company accounts and your self-assessment return and confirmation statement filings, please contact our accountants and they will be more than happy to help you.

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