Starting a business takes courage, planning and a lot of late evenings. Tax is usually the part new founders put off — until a deadline letter arrives. This guide fixes that. It explains, in plain English, exactly which taxes a women-led startup pays in its first year in the UK, what the 2026/27 rates are, and how much to set aside, so there are no nasty surprises.
The short answer: in your first year, a women-led startup pays business tax based on its legal structure. As a sole trader you pay Income Tax (20% on profits above £12,570) plus Class 4 National Insurance (6%) on profits, through Self Assessment. As a limited company, the company pays Corporation Tax (19% on profits up to £50,000), and you pay personal tax on what you take out of it.
What “Business Tax” Actually Means for a Startup
“Business tax” is not one single tax. It is a bundle, and which parts apply to you depends on how your startup is set up:
- Sole trader or partnership: you and the business are the same for tax purposes. You pay Income Tax and National Insurance on your profits.
- Limited company: the company is separate. It pays Corporation Tax on its profits, and you are taxed personally on salary or dividends you take.
- Any structure: if your turnover passes the VAT threshold, VAT joins the list too.
That is why two women-led startups with the same £30,000 profit can pay very different amounts of tax. The structure you choose at launch shapes your first-year bill. If you are still deciding, read our guide to business tax for UK startups in their first year alongside this one.
If You Launch as a Sole Trader
Most women-led startups begin as sole traders because it is simple: no company to register, no separate accounts to file, and you can start trading straight away. You must register for Self Assessment by 5 October following the end of the tax year in which you started trading, and file your first return online by the following 31 January.
Your taxable profit is your income minus your allowable expenses — things like stock, software, phone costs, travel and a share of home-working costs. Keep every receipt. Allowable expenses directly reduce your bill, and many first-year founders overpay simply because they forget to claim them.
Income Tax rates for 2026/27
The tax year runs from 6 April 2026 to 5 April 2027. For England, Wales and Northern Ireland, the rates are:
| Band | Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
Only the slice of profit inside each band is taxed at that band’s rate. Earning £50,271 does not mean all your profit is taxed at 40% — just the £1 above the threshold. Full details are on the GOV.UK Income Tax rates page.
National Insurance for the self-employed
On top of Income Tax, self-employed founders pay Class 4 National Insurance on profits above £12,570:
| Profits (2026/27) | Class 4 rate |
|---|---|
| £12,570 to £50,270 | 6% |
| Over £50,270 | 2% |
Class 2 contributions are treated as paid if your profits are £7,105 or more, which protects your State Pension record at no extra cost. If profits are below £7,105, you can choose to pay voluntary Class 2 at £3.65 a week. Both are worked out through your Self Assessment return — you do not pay them separately.
One more first-year trap: payments on account. If your first tax bill is over £3,000, HMRC usually asks you to pay half of next year’s estimated bill in advance — one payment on 31 January and one on 31 July. Many new founders are caught out by that second payment, so set money aside from month one.
Worked £ Example: £30,000 Profit as a Sole Trader
Imagine Amara, who launches a home-based branding studio and makes £30,000 profit in her first year after expenses. Here is her 2026/27 bill:
| Item | Calculation | Amount |
|---|---|---|
| Income Tax | 20% × (£30,000 − £12,570) | £3,486.00 |
| Class 4 National Insurance | 6% × (£30,000 − £12,570) | £1,045.80 |
| Total first-year tax | £4,531.80 |
That is about 15% of her profit. A sensible habit is to move 20–30% of every payment you receive into a separate savings account, so the January bill never hurts. If Amara’s trading income had been £1,000 or less, the £1,000 trading allowance could have meant no tax to pay at all — worth knowing if you start very small.
If You Launch as a Limited Company
A limited company pays Corporation Tax on its profits, not Income Tax. For 2026/27:
| Company profits | Corporation Tax rate |
|---|---|
| Up to £50,000 | 19% (small profits rate) |
| £50,000 to £250,000 | Marginal relief applies |
| Over £250,000 | 25% (main rate) |
On the same £30,000 profit, a limited company pays 19%, which is £5,700 — more than Amara’s £4,531.80 as a sole trader. But the comparison is not that simple. As a director you can also take a salary (taxed through PAYE) and dividends (taxed at dividend rates depending on your Income Tax band), and the company gives you limited liability — your personal assets are normally protected if the business fails. A company also has extra duties: a £50 confirmation statement every year, accounts filed with Companies House within 9 months of the year end, and a Company Tax Return within 12 months (with the tax itself due 9 months and 1 day after the year end).
If you hire staff, employer National Insurance joins the list: 15% on employee earnings above £5,000 a year in 2026/27, although the Employment Allowance of up to £10,500 can offset much of it for small employers.
VAT: The Threshold That Catches Fast-Growing Startups
VAT is separate from Income Tax and Corporation Tax. You must register for VAT within 30 days once your taxable turnover passes £90,000 in a rolling 12-month period — not just in a tax year. Many women-led startups in retail, beauty or food hit this faster than they expect during a good few months, so track your rolling turnover monthly. If turnover later falls below £88,000, you can apply to deregister. Voluntary registration before £90,000 can make sense if your customers are mostly VAT-registered businesses, but it adds admin, so take advice first.
5 First-Year Tax Mistakes Women Founders Make
- Missing the registration deadline. Register for Self Assessment by 5 October after the tax year you started trading. Late registration brings penalties.
- Mixing personal and business money. Use a separate bank account, even as a sole trader. Untangling a year’s mixed spending is miserable.
- Forgetting allowable expenses. Phone, software, travel, home office costs and professional fees all count. Claim them all, with receipts.
- Ignoring payments on account. Budget for the July payment as well as the January one, or your second year starts with a shock bill.
- Not watching the VAT threshold. A sudden growth spurt can push you over £90,000. Check your rolling 12-month turnover every month.
Your First-Year Tax Checklist
| When | What to do |
|---|---|
| At launch | Choose sole trader or limited company; open a separate business bank account |
| Every month | Record income and expenses; check rolling 12-month turnover against £90,000 |
| 5 October after the tax year | Deadline to register for Self Assessment |
| 31 January | File your return online and pay your bill (plus first payment on account, if due) |
| 31 July | Second payment on account, if due |
| If limited | File confirmation statement (£50) and accounts on time |
FAQ
Do I pay tax in my first year if I make a loss?
No Income Tax or Corporation Tax is due on a loss. Keep full records anyway — losses can usually be carried forward against future profits, which lowers later bills.
Should I start as a sole trader or a limited company?
If you want simplicity and low admin, start as a sole trader. If you want limited liability, plan to take on investment, or expect profits well above £50,000, a limited company may suit you better. You can switch later, but switching has its own tax steps, so choose carefully at launch.
How much of my income should I set aside for tax?
Put aside 20–30% of every payment into a separate account. At £30,000 profit the actual bill is around 15%, but the extra buffer covers payments on account and any surprise adjustments.
When is my first tax return actually due?
It depends on when you started. If you started trading in 2026/27, register by 5 October 2027 and file online by 31 January 2028. The key date is 31 January after the tax year ends.
Conclusion
Business tax in your first year is manageable once you know which structure you are in and which deadlines apply. As a sole trader, expect Income Tax at 20% above £12,570 plus 6% Class 4 National Insurance. As a limited company, expect 19% Corporation Tax on profits up to £50,000 plus personal tax on what you draw. Track your turnover against the £90,000 VAT threshold, claim every allowable expense, and set money aside from your very first sale. Do those four things and your first tax return becomes a routine task, not a crisis — leaving you free to grow the business you started.
