The United Kingdom is located in Northern Europe and is one of the most economically advanced countries in the world. Its capital, London, is also known as the world’s economic capital and is a hub for global investment. Due to this fact, many entrepreneurs like to exploit the opportunities present in the land of the Queen.
Besides the fact that it is an economic powerhouse, the economy is also less susceptible to the economic shocks experienced by other countries. For example, despite the economic meltdown of 2008 and the shocks caused by the pandemic of 2020, businesses managed to stay afloat in the UK when others were falling apart elsewhere. However, despite the attractive opportunities, many foreigners struggle to start businesses here because of the tremendous regulations and processes involved.
If you want to start a business in the UK as a foreigner, we will show you how in this article. But before we review the steps you have to take, here are some things you should know.
Why should you start a business in the UK?
Did you know that the UK ranks high globally in the ease of doing business? This is because policymakers make it very easy for businesses to thrive. Furthermore, the value of the UK’s GDP as of 2020 was £1.96 trillion, which represented a fall of nearly £216 billion compared to 2019 estimates. Despite the drop caused by the pandemic, you should know that other developed countries suffered even greater losses than the UK. This only goes to show that what you are seeing is a country that is well-grounded economically and still manages to thrive against all odds.
So should you choose to start a business, you will be doing so in a country with a positive ranking for ease of doing business, world class infrastructure, and a population with a strong currency and purchasing power.
How do you start a business in the UK as a foreigner
With that out of the way, let us now show you the steps you need to take to start a business in the UK.
Get a Visa
As a foreigner, you will need to get a visa before starting a business in the UK, but this depends on your country of origin. Citizens of selected countries are granted waivers, However, if you are not from any of the approved countries, you will have to apply for a visa. After applying for an entry visa, you may also need to apply for a investor visa before starting your business.
Due to the strict application process, many consider it to be difficult; however, if you have the right information and go through the proper channels, you should have no problems. You also need to know that visa applications are usually accepted or rejected within a three weeks period.
Another thing to take note of is that the immigration system of the UK is point-based and divided into 2 tiers.
- Tier 1: Visas for Investors, Entrepreneurs, highly skilled workers is quite strict, and the individual must have investment capital of at least £50,000 or must have invested that amount over the last 12 months.
- Tier 2: For other types of non-business applicants
As for Tier 1 applicants, if they have not invested £50,000 over the last 12 months, then they must show proof that the money will come from any of these sources.
- An endorsed UK fund for entrepreneurs
- Venture capitalist fund registered with the FCA
- Funding department for business startups
Types of business visa for foreigners
When applying for a UK visa to start a business, there are three types of visa, and you will need to apply for one of them. They are the Business Development, Talent, and Investor Visa. All these visas fall under the Tier 1 visa. Let us review them in detail.
This is a visa for those who wish to start an innovative business in the United Kingdom. To qualify for this visa, you must prove that what you want to offer is different from any other current business innovation. Furthermore, an approved body or institution ought to have endorsed your business idea as a feasible one. The eligibility criteria for this are very strict, and proof of a £50,000 investment fund is a criterion. You also need to provide proof of the source of the funds.
Immigration will also demand that you have enough money to support yourself. You need to have about £1,270 in your bank account for the last 28 consecutive days. Another criterion is your ability to speak English up to level B2 CEFR Scale.
The application fee is quite steep at £1,021 if you are switching your visa though this is lowered for citizens from Germany, France, Spain, or a few other countries. The good part is that you can remain and do business in the country for three years under this visa class, and you are also allowed to apply for unlimited extensions.
Business Development/Start-Up Visa
Another visa you can apply for as a foreigner is a business development visa or for a startup. There is no investment fund requirement under this category, but you still have to prove that you have had at least £1,270 in your account for 28 consecutive days before switching visas. Furthermore, you need to be endorsed by an authorized body. Endorsements from higher institutions of learning and business organizations are accepted.
Under this visa class, you can only stay in the country for 24 months maximum, and the visa can not be extended. However, you are allowed to switch to an innovator visa if you so wish. The ability to speak English up to at least a B2 CEFR level is also a criterion. The application fee is £363, and to switch to a different visa, you will be charged £493. However, do note that the fees change from time to time.
Global Talent Visa
If you are skilled in any of these categories, you can apply for a global talent visa. The categories are
- Digital technology
- Academia and Research
- Arts and Culture
A relevant body has to approve your application then the Home Office will review your application. With this visa, you can live and work in the UK for a period of five years.
Decide on the type of business you wish to invest in
This step will likely come first before the others since it makes no sense to apply for a visa without first knowing what business you want to do. Do you want to go into real estate, manufacturing, healthcare, or any other service sector? Your choice will determine the type of visa you apply for.
Decide the business structure
Are you starting the business with a partner or a set of partners? If you are, that makes it a partnership business. If you are going at it alone, you may want to stick to a sole proprietorship model. But note the business structure you pick has legal implications. Moreover, different types of businesses pay different rates of tax. And these structures also have different registration criteria.
Another option is to make it a Limited Liability partnership if you have partners or simply make it a limited company. The structure you choose will reflect in your registration document.
Open and register a bank account
Opening a bank account in the UK as a foreigner is even more important than in your home country if you want to start a business. With a bank account, you can execute international transactions, but this is not always easy. Opening a bank account in the UK can be challenging for some, but it is a prerequisite for success. The main challenge you will have to deal with is the strict policy safeguards against money laundering schemes. Here are the ways to register a bank account in the UK as a foreigner.
Resident account: During the account opening process, the bank will ask you to provide your documents to prove your residency. They will also ask you to provide a utility bill showing your name and address. To apply for a bank account using this method, you must have stayed in the UK for at least 6 months with a valid tenancy in a house. Furthermore, the house address must be different from your work or office address. If you do not qualify for this method, approach your bank for any other method.
International Banking: Another UK bank account you can open to start your business is that of an international banking account with any of the banking institutions in the country. Fortunately for you, there are several banks like Barclays and Lloyd with global banking connections. To utilize this method, you need a valid passport, proof of address, and a national identity card issued by your home country. In addition, there may be documents demanded by the bank you approach.
Business tax registration
The UK operates a very strict tax regime, and the business structure you choose will determine how much you pay as tax. Another step to start a business in the UK is to register the business with any UK tax body. Failure to pay your tax may lead to the closure of your business, and this will affect your status as a legal immigrant in the UK. So the responsible thing to do is to register for tax. The body responsible for handling tax regulations is Her Majesty’s Revenue and Customs (HMRC). The information you have to provide include
- Starting date of work
- Company registration number
- The end date for annual account preparation
The following records will be demanded of you every year
- Profit and Loss accounts of the company
- Purchase and Sales invoices
- Orders and delivery notes
- Cash books
- Bank Statements (Cheque Books, E-Payment)
- VAT Records
- Debit & Credit notes
- Record of payroll
- Other relevant documents
Set up a virtual office
Another platform you may need to set up if you want to keep costs low is a virtual office. A virtual office provides your business with all the features of a physical business office but without a physical structure. Whether you have employees or not, you can run your business more efficiently. Features of a virtual office that you can use to bring costs down include
- Video conferencing
- Virtual meeting rooms
- Answering machine
- Mailing services
You can go with the virtual office and can serve your clientele and do all the things a conventional business will do but without the extra cost of maintaining a property or employing so much staff.
Join an association
As a foreigner in the UK looking to start a business, it pays to join an association in your line of business. If you are into hotel management, for example, joining an association of hoteliers will help you make the right connections to grow. You will also enjoy the benefits of networking with others in your field, which will benefit you for years to come. Another great benefit of joining an association is because it will help you with the resources you need regarding registrations and avoiding breaking legal codes that may attract sanctions.
Starting a business in the UK as a foreigner may seem like a daunting task, but it is not if you go about it the right way with an effective business plan. Going through the appropriate channels is imperative and the right thing to do. In this article, we have provided you with the steps to take to start a business in the UK. However, we still advise that you seek professional advice before you commence the process.