This post is for educational purposes only. For legal or tax advice related to your specific business, please consult a qualified professional.
The Consumer Rights Act
Tax laws
Trademark laws
Employment laws
Data Protection
Starting a business isn’t all hands-on work. Whatever your small business there will be some laws and regulations you need to get your head around and ensure you’re complying. We’ve broken down five crucial ones here. Every UK business is subject to different rules, and this list is in no way exhaustive, but it’ll help you to start to consider the essentials.
The Consumer Rights Act
The Consumer Rights Act protects the rights of customers, whilst allowing businesses to sell to them with confidence. It came into force in October 2015 and replaces three other pieces of legislation: the Sale of Goods Act, Unfair Terms in Consumer Contracts Regulations and the Supply of Goods and Services Act.
What it means for you
The Consumer Rights Act legally binds all businesses to provide goods and services (digital as well as physical) of a satisfactory quality, which are fit for purpose and as described. This means:
- Satisfactory quality.
Selling goods that aren’t faulty or damaged. The price of a product and its quality should be fairly matched. - Fit for purpose.
Selling goods that are fit for the purpose they are supplied for (or agreed to perform) before purchase. - As described.
Ensuring that the goods you sell match the description, models or samples supplied to the customer.
For more see: Consumer Rights Act, guidance for business.
Tax laws
Every UK business has to pay tax, but there are several types you need to know about.
Corporation tax
Corporation Tax must be paid by all:
- Limited companies
- Foreign companies with a UK branch or office
- Clubs, cooperatives and unincorporated associations (like community groups and sports clubs)
Whether you have to pay it depends on how your business is registered.
If applicable you should register for Corporation Tax within three months of trading to avoid a fine.
Corporation tax rates and allowances are reviewed regularly. In 2021 it stands at 19%.
What it means for you
Corporation Tax must be paid before you file your business’s tax return, nine months and one day after the end of your accounting period for the previous year. If your accounting period ends on 31st March (as most do), the deadline to pay your Corporation Tax would be January 1st the following year.
You need to prepare your tax return to work out how much Corporation Tax is due — and the deadline for your tax return is 12 months following the accounting period it covers. This means that in your limited company’s first year, there may be two Corporation Tax periods. Why? Because your accounting period can’t extend beyond 12 months.
Find out more here.
Value Added Tax (VAT)
Value Added Tax, which everybody of course knows as VAT, is a tax on the sales of goods and services bought and sold for use or consumption within the EU. It’s a “consumption tax” because the cost is ultimately paid by customers rather than businesses.
VAT is charged as a percentage of the price of goods. This means the actual tax amount is visible at each stage in the production and distribution chain.
What it means for you
Businesses with an annual turnover that’s more than the current VAT threshold – £85,000 in 2021 – must register to pay and complete a quarterly VAT return. If you’re VAT-registered, you have to charge VAT on your goods or services even if you operate on an exchange or part-exchange basis. You can also reclaim VAT on those you buy for business-related purposes.
VAT-registered businesses should report the amount of VAT they’ve charged or paid to HRMC via a VAT return, usually completed once every 3 months. You’ve got to do this even if you have no VAT to pay.
Over-charges of VAT by you to the customer must be paid to HMRC. If you end up paying more VAT than you’ve charged your customers, the difference can be reclaimed.
Find out more in our guide ‘What is VAT’.
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National Insurance (NI)
National Insurance (NI) is an employment tax paid based on employee earnings. It funds state benefits like pensions, jobseekers and maternity allowance.
There are different NI rates and categories based on how much an employee earns. Part of the National Insurance payment is deducted from an employee’s pay and part has to be paid by the employer.
What it means for you
If you have employees, you’re responsible for deducting National Insurance from their wages each month. Each of them will have a tax code that tells you how much needs to be taken. This money goes to HMRC, and has two parts:
- The employee’s National Insurance Contributions: a deduction from gross pay
- The employer’s National Insurance Contributions: a cost paid out in addition to the gross pay
To be able to make these contributions, you have to register as an employer and join the government’s PAYE scheme. You can then run the payroll yourself to work out and make deductions or hire a payroll provider.
Self-employed people also need to pay National Insurance. If you’re self-employed in 2021/2022 you need to pay:
- Class 2 NI payments if your profits are £6,515 or more a year (£3.05 a week)
- Class 4 NI payments if your profits are £9,569 or more a year (9% on profits between £9,569 and £50,270 and 2% on profits over £50,270)
**Find out more via the Government’s National Insurance page.
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Income tax
As with National Insurance, Income Tax is paid to HMRC on behalf of employees through your payroll. The same thresholds apply too, but unlike National Insurance, Income Tax is calculated on a cumulative basis.
In England, Wales and Northern Ireland in 2021/2022, the following rates apply:
| Taxable employment income | Tax rate |
|---|---|
| Up to £12,570 | 0% |
| £12,571 to £50,270 | 20% |
| £50,271 to £150,000 | 40% |
| over £150,000 | 45% |
What it means for you
The same process applies as with National Insurance, paying through the PAYE scheme according to each employee’s tax code.
Find out more here.
Feeling daunted by all this tax talk? You’re not alone, and there are ways you can access help.
Trademark laws
Trademarks help customers identify that a product or service you’re selling is yours. When you register one, you own its rights exclusively, preventing other companies from using something similar. You may think immediately of logos and taglines, but some businesses go as far as trademarking sounds, colours and shapes.
In the same way that trademark laws enable you to own the rights to something that’s yours, they also ensure you can never unlawfully use the trademark property of anyone else.
What it means for you
Getting your own trademark is a wise move, especially when your small business starts to grow. As you become more successful, attract more customers and make more profit, you become a bigger fish in the pond — a bigger threat to your competitors. It’s in your interest then to protect your reputation, and make sure people can tell the difference between goods and services that are genuinely yours and those that are not.
You can register your trademark here.
On the flip side, there are many things to consider when respecting the trademarks of other companies. Especially because infringing trademark law can lead to a lawsuit. Look at what similar companies use for their trademarks when designing your logo, tagline and other branding. Take note and come up with new ideas that use a different creative approach.
Discover more on: Trademark Infringement.
Employment laws
When it’s time to start hiring staff for your business, there are a number of employment laws to consider.
Immigration
When hiring non-British employees, it’s important to make sure they can legally work in the UK. If you’re unsure of someone’s immigration status, use the Employee Checking Service or right to work tool.
Rule changes mean this is also now the case for most EU (European Union), EEA (European Economic Area) and Swiss citizens. An EU passport or identity card cannot now be solely relied upon as proof that someone has the right to work in the UK. Irish citizens can still use their passport or passport card as proof of their right to work in the UK.
Via GOV.UK you can check which documents allow someone to work in the UK.
The Equality Act
The Equality Act legally protects people from discrimination in the workplace and in wider society. It makes sure that workplaces are free from “direct and indirect discrimination, harassment and victimisation”. It’s your responsibility as an employer to uphold these values and protect your staff.
**Read up: Equality Act 2010: guidance.
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Staff wages
Employers must abide by minimum wage rates in the UK.
As of 2021, the legal minimum wage for different age groups was:
| National Living Wage (23+) | £8.91 p/h |
| National Minimum Wage (21-22) | £8.36 p/h |
| National Minimum Wage (18-20) | £6.56 p/h |
| National Minimum Wage (under 18) | £4.64 p/h |
| Apprentice National Minimum Wage | £4.30 p/h |
What it means for you
Even though it may seem beneficial in the short-term to hire staff without the correct checks, to forgo clear guidance on conduct or even to pay employees less than the law outlines, it’s not worth your while. Employment laws exist not only to protect employees, but to help you create a stable and sustainable business. Beyond carrying out illegal activity and directly putting your business at risk, not following them can impact your bottom line.
Health & safety laws
Health & safety laws are tailored to specific industries, protecting everyone at work from accidents and negligence. At a basic level, every business owner should carry out risk assessments to see if and where potential problems could lie. You can then put measures in place to keep you and your staff out of harm’s way.
What it means for you
Health and Safety Executive (HSE) requirements vary according to the type of business you run, and in which industry.
See: HSE guidance by industry.
Data Protection laws
If you store information on your customers and staff — anything from having their contact details on a marketing database to using CCTV in your store — you have to follow rules on data protection. The basics are that that people’s information must be kept secure, accurate and up to date. You also have to be crystal clear about where you will use this information, and must ask for their permission to collect it in the first place.
What it means for you
There are many ways you could and should (legally) collect and protect your customers’ data. Each company and the data they store requires a different approach, so begin by researching your options.
Find out more about: Data protection and your business
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