Scottish taxation is mostly governed by UK law and administered by HM Revenue & Customs (HMRC). But local taxes, like business rates, are controlled by the Scottish Government and administered by local authorities.

National insurance is governed at UK level, with income tax devolved to the Scottish Government.

Corporation Tax

Companies in Scotland must pay UK Corporation Tax on profits. The main rate of Corporation Tax is 25% for companies with profits of £250,000 or more – this applies to all profits.

A Small Profits Rate of 19% will exist for Companies with profits of £50,000 or less.

You must register with HMRC to pay Corporation Tax within three months of starting your business.

If you do business as a sole trader, a partnership or a limited liability partnership (LLP), you do not pay Corporation Tax. But you must still pay tax based on the profits of the individuals involved in your business.

Sole traders also need to complete Self Assessment returns each year.

If you commercialise your patent in Scotland or develop a new patent here, you may benefit from the Patent Box scheme. This means paying reduced corporation tax on any profits you make by commercialising those patents - it could be as little as 10%.

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Value Added Tax (VAT)

VAT is a tax on supplies of goods and services. Businesses in Scotland (and the rest of the UK) must charge VAT on the goods and services they provide if they are registered with HMRC for VAT. Your business will be required to register if its turnover exceeds a set threshold, currently £85,000 per year (threshold set until March 2024).

The rate of VAT depends on the goods or services being supplied.

• The standard rate is 20%
• A reduced rate of 5% may apply to certain supplies such as utilities
• A zero rate applies to certain supplies, such as books and children’s clothes

VAT regulations and administrative requirements are complex. You should seek specialist advice from a lawyer or accountant if you are unsure about the amount of VAT which you should be charging.

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Business rates

Business rates are collected by councils to help pay for local services. These 'non-domestic rates' are worked out on your property and you’re the owner, tenant, or occupier of a non-domestic building for business, you may need to pay them.

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Tax on imports

Goods imported into the UK and other EU countries from non-EU countries are subject to import duties. These charges do not normally apply to services.

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Opening a business bank account

Getting a business bank account in Scotland can take anything from a couple of weeks to about three months, depending on the bank and type of account you choose. Each bank has its own requirements and processes and will conduct security and anti-money laundering checks.

A representative from your company, such as a director, usually needs to meet with the bank in-person to open the account and normally the company representative must reside in Scotland and the place of business address must also be based in Scotland.