Registering a Company While Working Full Time: Tax Considerations

If you are considering registering a company while working full-time, in addition to paying tax through PAYE with your employer, you will need to submit an HMRC self-assessment and corporation tax return each year for your company and register for PAYE if paying yourself a salary. Running a business while working full-time can offer enormous benefits to those who take on this challenge, and may ultimately enable them to leave their job and run their own business on a full-time basis. Without a proper understanding of HMRC’s rules on working while running a business, you may land yourself with an unexpectedly high tax bill. In this article, we will explain the tax implications of registering and running a company in the UK while working full-time for an employer.

Can I register a company and work full-time?

Running a business while working full-time may be a viable option for you, but this will largely depend on whether there are any restrictions in your employment contract. It is essential to review your employment contract before registering your company. In particular, always check if it contains any clauses which might stop you from doing so. These may include clauses relating to:

• Conflict of interest – your employment contract is likely to have a clause requiring employees to avoid situations where their interests conflict with those of the employer. 
• Duties of fidelity – all employees owe a ‘duty of fidelity’, requiring them to act in good faith towards their employer at all times. As such, it is important to make sure that your company does not conflict with this duty (e.g. setting up a company that causes harm to your employer)
• Exclusivity clauses – many employment contracts require employees to devote their full working time to their employer. This may prevent you from working for your company during regular working hours.

There are other clauses, including those related to confidentiality and intellectual property and restrictive covenants that may restrict your ability to work for an employer and run your own business. If you are unsure, speak to a specialist in employment law who can assess this for you. 

Registering your company with HMRC

When running a business while working full-time, you will also need to register your venture with HMRC for corporation tax within 3 months of starting to trade. The good news is that you will be automatically registered for corporation tax when you register your company with Companies House. Once registered, HMRC will send you a letter containing your company’s Corporation Tax Number. This will be needed when you submit corporation tax returns.

In addition to corporation tax, you may need to register with HMRC for PAYE and VAT. A company director is considered an employee, and hence their salary and any other taxable benefits are reported and paid by the company through HMRC’s PAYE scheme. 

Income tax

If you are considering registering a company while working for an employer, you will likely need to pay:

• Income tax and National insurance through your employer – Your employer will continue to deduct any income tax and National Insurance you owe from your wages and ensure these are paid to HMRC directly. You will receive a P60 at the end of each tax year, confirming the amount of income you have received and the tax paid. 
• Income tax and National insurance through your own company – this may include:
  • Dividend tax on any dividends you receive from your company (see below for more details)
  • Income tax through PAYE if you pay yourself a salary, and 
  • National Insurance Contributions (NICs) (these will paid by you and the company)

National Insurance Contributions (NICs)

As a company director receiving a salary, you will need to pay Class 1 National Insurance contributions (NIC). In addition, your company will need to pay employer’s Class 1 National Insurance if your salary exceeds the secondary NIC threshold of £9,100 per year. 

How much income tax will I pay?

When working out how much income tax you will pay, you will need to combine the tax you pay through your employer and your company. Bear in mind that your combined income from employment and your company may place you into a higher tax bracket. The current tax brackets for the tax year 2025/26 are as follows:

Band	Taxable Income	Tax Rate
Personal Allowance	Up to £12,570	0%
Basic Rate	£12,571 – £50,270	20%
Higher Rate	£50,271 – £125,140	40%
Additional Rate	Over £125,140	45%

What is dividend tax?

As a company owner, you can pay yourself in the form of dividends on which you will need to pay dividend tax to HMRC. Remember, dividends should only be taken from the company’s profits. One of the main ways that company directors reduce the amount of income tax they pay to HMRC is by only paying themselves a small salary up to the tax threshold of £12,570 and then receiving the remainder in the form of dividends. The current dividend tax rates for the tax year 2025/26 are as follows:

Tax Band	Taxable Income Range	Dividend Tax Rate
Basic Rate	£12,571 – £50,270	8.75%
Higher Rate	£50,271 – £125,140	33.75%
Additional Rate	Over £125,140	39.35%

Another benefit of taking dividends rather than a salary is that no employee or employer NICs are payable on that amount.

What are the implications of corporation tax?

Corporation tax refers to the amount of tax paid by your company on any profits it makes during the financial year. Your company must file a corporation tax return (CTR) using form CT600 each year, setting out its profit in the financial year and how much Corporation Tax is owed. The current rates of corporation tax for the 2025/26 tax year are as follows:

Profit	Tax Rate
£0 – £50,000	19% (small profits rate)
£50,001 – £250,000	Marginal relief applies
Over £250,000	25% (main rate)

Marginal relief means that the amount of corporation tax your company will pay gradually increases from the small profits rate of 19% to the main rate of 25% between profits of £50,000 and £250,000. As a company director, you are legally required to ensure that your company accounts and corporation tax return are filed on time, as follows:

Task	Deadline
Register for Corporation Tax	Within 3 months of starting to trade
Pay tax owed	9 months and 1 day after accounting year ends
File CT600 return	12 months after the accounting year ends

Company VAT

You will need to register your company with HMRC for VAT within 30 days of reaching the VAT threshold for taxable turnover of £90,000. Once your business is VAT-registered, you are required to:

• Charge the correct rate of VAT on all goods and services you sell
• Include VAT in the price you display to customers
• Keep records of the VAT you pay on business-related purchases
• Account for VAT on goods you import into the UK
• Submit a VAT return to HMRC—usually every three months—reporting the VAT you’ve charged and paid
• Pay any VAT owed to HMRC

Should I register as a sole trader or a limited company?

There are some key differences between trading as a sole trader versus a limited company. Administration and tax are generally simpler for sole traders, however, they do not have the legal protection of limited liability and do not benefit from the tax benefits enjoyed by companies. Corporation tax is paid at 19% (on profits up to £50,000), and no national insurance is payable on dividends. As such, the financial advantage of being able to split any income you receive from your company between salary and dividends can be considerable. 

If you are unsure which business model to adopt for your new business, consider consulting with an accountant who can explain the differences and recommend the best option based on your plans and needs.

How can I ensure that I am paying the correct amount of tax?

Dealing with tax as a company director and someone who is separately employed on a full-time basis can be overwhelming, especially since your time is often minimal. To ensure that you are meeting your tax obligations as a company director, that you are paying the right amounts, and you adopt a beneficial tax strategy, always speak to a trusted accountant who understands your business and working arrangements.

Final words

Before venturing into setting up and running a business while working full-time, we recommend doing your homework. Always verify that there are no legal restrictions that prevent you from setting up a company while employed. If you have the green light to proceed, the next stage is to understand the various types of business models available and their corresponding tax implications. Registering as a limited company will offer you many additional benefits, including legal separation from your business and personal limited liability from any debts of the company.