UK business laws you need to know

UK business laws regulate all aspects of setting up and running a business in the United Kingdom. They cover a broad range of areas, from company law and contract law to taxation, consumer rights, and employment. Whether you’re a self-employed sole trader or operate through a limited company or partnership, understanding the UK laws applicable to your business is crucial. 

In this post, we provide an overview of key business laws in the UK that you may need to know. However, to ensure your business is compliant, we recommend seeking specialist advice if you are unsure of your obligations or have concerns about a particular issue.

1. Company law 

Company law is a subset of business law. The framework in the UK is primarily set out in the Companies Act 2006. This Act covers the formation, management, regulation, and dissolution of companies operating in any part of the United Kingdom. 

In addition to private and public companies limited by shares or guarantee, the Act makes provision for other forms of business organisation. These include unlimited companies, limited liability partnerships (LLPs), limited partnerships, and unincorporated associations.

If you’re a member, director, or person with significant control (PSC) of any such organisation in the UK, it’s important to familiarise yourself with your rights and duties under the Companies Act 2006. Doing so will help you fulfil your legal obligations and ensure the business complies with UK company law. 

Broadly, the general arrangement of the Companies Act 2006 is as follows:

Parts 1 to 7

The fundamentals of what a company is, incorporation requirements and the company formation process, the articles of association, rules and restrictions on company names, and the duty to maintain a registered office address.

Parts 8 to 12

These parts focus on the requirements, rights, and responsibilities of a company’s members (shareholders or guarantors) and officers (directors and company secretary). They cover voting and decision-making powers, the general duties of company directors, and the procedures for appointing and removing directors.

Parts 13 and 14

Rules on company resolutions and the required procedures when calling and holding general meetings of members.

Parts 15 and 16 

Provisions relating to company accounts and reports, including a company’s financial year, the duty to prepare and file annual accounts, requirements for keeping accounting records, the small companies regime applying to companies qualifying as small or micro-entities, and rules for audited accounts. 

Parts 17 to 25

Company shares and share capital, rules on issuing and transferring shares, information on people with significant control (PSCs), preparation and filing of annual confirmation statements, and registration of company charges. 

Parts 26 to 28

Provisions for arrangements between a company and its creditors or members, company reconstructions relating to companies in financial difficulty, and requirements applicable to mergers and takeovers.

Parts 29 to 39

Offences of fraudulent trading, company dissolution and restoration, provisions applying to overseas companies operating in the UK, the functions of Companies House, and offences and financial penalties under the Companies Act.

Parts 40 to 42

Overseas disqualification of directors, restrictions on business names applying to all persons carrying on business in the UK (not just companies), and the appointment of statutory auditors.

Part 43 

Corporate transparency obligations, including the requirement to disclose information on the public register at Companies House.

Parts 44 to 47

Miscellaneous and general provisions, including the extension of the Companies Acts to Northern Ireland, UK Societas, and certain other forms of business organisation.

2. Contract law

Contracts are the lifeblood of any business, governing transactions and agreements between two or more parties. Every type and size of business in the UK will enter into contracts with individuals and other organisations, from clients and customers to suppliers and service providers. 

Ensuring contracts between traders and consumers are well-drafted and include all necessary information provides fairness, clarity, and security for all parties involved. Oftentimes, they are also a legal requirement—for example, when hiring employees.

Contracts can be formed verbally or in writing, subject to certain exceptions such as settlement agreements between an employer and employee. Verbal contracts are no less binding than those committed to paper. Depending on the execution of a contract, it may be governed by English Law, Scots Law, or Northern Irish Law. 

3. Tax laws

There are numerous tax laws to be aware of when running a UK business as a limited company, partnership, or self-employed individual. These laws will impact your business profits and personal remuneration. 

• 2024-25 tax guide for UK business owners

UK tax legislation also applies to non-UK resident company directors and shareholders. However, depending on your country of residence, it may be possible to claim double taxation relief to avoid being taxed twice. 

The tax laws applicable to your UK business include but are not limited to the following Acts of Parliament:

Corporation Tax Act 2010

This Act relates to calculating and paying Corporation Tax chargeable on company profits. All companies operating in the UK are subject to Corporation Tax rates of 19-25% on taxable profits from trading, investments, and the sale of assets. 

Income Tax Acts

In the UK, the Income Tax Acts cover all enactments relating to Income Tax payable by individual taxpayers on their personal earnings.  

Income Tax (Earnings and Pensions) Act 2003

The Income Tax (Earnings and Pensions) Act 2003 relates to the tax chargeable on income from employment, pensions, and social security. It also makes provision for the High Income Child Benefit Charge. 

Income Tax (Trading and Other Income) Act 2005

This Act concerns charges to tax on trading income from self-employment, property income, savings and investment income, and certain miscellaneous income. 

It also contains provisions about the tax-free trading allowance and property allowance, Rent-a-Room Scheme, and special rules for foreign income and partnerships.

Income Tax Act 2007

The Income Tax Act 2007 contains all of the main provisions about Income Tax not covered in earlier legislation. These include the chargeable Income Tax rates in England and Northern Ireland, Income Tax in Scotland, and the rates in Wales.

This Act also covers tax on dividend income from company shares, calculation of tax liability, and taxpayers’ personal reliefs such as the annual tax-free Personal Allowance.

Taxation (International and Other Provisions) Act 2010 

The Taxation (International and Other Provisions) Act 2010 contains provisions concerning international aspects of taxation, including double taxation relief.

Stamp Duty Land Tax Act 2015

The Stamp Duty Land Tax Act 2015 provides for Stamp Duty Land Tax on residential property transactions in England and Northern Ireland. 

The Land and Buildings Transaction Tax (Scotland) Act 2013 regulates tax when buying property or land in Scotland. 

In Wales, the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 provides for tax chargeable on the purchase of property or land in Wales.

Capital Gains Tax Act 1992

This Act deals with Capital Gains Tax (CGT) on an individual’s chargeable gains (profit) when they sell or otherwise dispose of certain assets. The types of disposals subject to CGT include personal possessions worth more than £6,000, property that isn’t your main home, company shares, and business assets. 

Value Added Tax Act 1994

The Value Added Tax Act 1994 consolidates the enactments relating to Value Added Tax (VAT) in the UK. It deals with the VAT chargeable on the supply of goods or services in the UK and the importation of goods into the UK.

• A guide to commonly used VAT terms in the UK

You must register your business for VAT if your total taxable turnover for the last 12 months exceeds £90,000 (the  VAT registration  threshold) or you expect this to happen in the next 30 days.

Once registered, you need to charge and collect the correct rate of VAT on the goods or services you sell. You must also submit a VAT Return to HMRC after each VAT accounting period and pay any VAT you owe. As a VAT-registered business, you can reclaim VAT paid to other businesses.

Non-Domestic Rating Act 2023

This Act deals with non-domestic ratings, otherwise known as ‘business rates’, applicable to occupiers and owners of commercial property in England and Wales.

Business rates are chargeable on most non-domestic properties, such as:

• shops
• offices
• pubs
• warehouses
• factories
• holiday rental homes
• guest houses

You may have to pay rates if your business uses a building (or part of one) for non-domestic purposes.

Business rates in Scotland and Northern Ireland are handled differently. The Non-Domestic Rates (Scotland) Act 2020 makes provision for business rates on commercial properties in Scotland.

4. Consumer rights laws

UK consumer laws automatically apply to your business when you sell or provide products or services on the market. The main framework of consumer protection is covered by the Consumer Rights Act 2015, which deals with matters such as:

• the requirement for goods and services to be of satisfactory quality, fit for purpose, and as described
• unfair contract terms and notices
• rules on delivery, exchanges, returns, refunds, and warranties
• rights to a refund, repair, or replacement when goods or services are faulty, damaged, or of unsatisfactory quality 
• businesses acting in a way that is not competitive
• investigatory and enforcement powers of certain enforcers, such as the Competitions and Markets Authority and Trading Standards

Whilst primarily designed to protect consumers, the law also contains rules to safeguard the rights and vulnerabilities of small businesses. It’s crucial to understand your obligations under UK consumer law. Failure to comply can result in substantial fines, legal disputes, and reputational damage. 

5. Data protection laws

Many businesses overlook data protection laws and regulations. However, if you have access to personal information relating to customers, staff, account holders, or any other individual, your business (and everyone in it) is legally required to follow seven key ‘data protection principles’. 

These rules apply under the Data Protection Act 2018, which is the UK’s implementation of the General Data Protection Regulation (GDPR). They are designed to ensure that third parties keep personal information secure and that it is used fairly, lawfully, and transparently.

• Do I need to pay the ICO data protection fee?
• 10 things your company website absolutely must have
• 2024-25 tax guide for UK business owners

When you collect personal data, you must tell the individual who you are and how you will use their information. This includes whether you will share it with other organisations. You must also inform individuals that they have the right to:

• view the information you hold on them and correct it if it’s wrong
• ask you to delete their data
• request that you refrain from using their data for certain purposes

To comply with the requirements of the Act and GDPR rules, your business website must also be GDPR-compliant. To do so, you will need to maintain an up-to-date privacy notice. If you use cookies to track customer behaviour on your site, you must also have a cookie policy in place.

Any infringement of the data protection principles can expose your business to substantial fines and legal action.

6. Employment law

UK employment law governs the relationship between employers and their employees. It will apply to your business if you hire staff, take on apprentices or volunteers, or use certain contractors or sub-contractors to carry out work.

As an employer in the UK, some of your key responsibilities include:

• registering with HMRC as an employer and providing all necessary information via Pay As You Earn (PAYE), if applicable
• providing a written statement of employment particulars (this is not an employment contract)
• paying agreed salaries and at least the National Minimum Wage
• statutory payments and leave, such as Statutory Sick Pay, Maternity Pay and unpaid parental leave
• providing the proper equipment and a safe workplace that complies with health and safety requirements
• ensuring workers receive the correct rest breaks and annual leave hours
• ensure the workplace is free from discrimination and harassment
• following the rules on recruitment, discipline, grievance, and dismissal procedures
• adhering to data protection principles relating to employees’ personal information

Employment law is incredibly complex, making mistakes and oversights all too easy. Moreover, legislation in this area is ever-evolving, with several changes to UK employment law having been introduced in 2024 alone.

• Changes to UK employment law in 2024

If you currently have employees or intend to hire staff in the future, it may be worthwhile seeking professional advice from an employment law specialist or HR advisor. This will ensure you understand your key responsibilities as an employer and remain up-to-date in your knowledge.

They can also assist with implementing written policies that set clear expectations for employee behaviour and workplace procedures. These policies can help articulate your business values and foster a positive organisational culture. 

Should I obtain legal advice for my small business?

Business law and taxation rules can be complicated to navigate, especially for a new business owner. As such, it often pays to seek specialist guidance in certain areas. Most business owners find it necessary to obtain professional advice and assistance from a legal expert, employment specialist, accountant, or tax advisor at some point.

Please comment below if you have any questions about this post. You can also explore the 1st Formations Blog for more small business advice and limited company guidance.