Expanding your business into the United Kingdom can be a decisive move for international growth. The UK offers a strong consumer market, access to world-class talent, and one of the most open environments for foreign investment. Its legal and regulatory systems are transparent, its financial infrastructure is sophisticated, and English remains the global language of business.
Creating a subsidiary in the UK is a streamlined process that can often be completed within 24 hours. For international groups, a UK subsidiary provides a credible local presence, and access to one of the world’s most established business ecosystems.
In 2025, the UK remains a prime location for business expansion through foreign investment—stable, globally connected, and increasingly digital in its approach to business regulation.
Practical Tips for a Smooth Setup
- Start the banking process early
- Prepare for digital filing and verification rules in 2025
- Don’t delay PAYE registrations if hiring
- Use bilingual or local directors to streamline bank and client interactions
- Review transfer pricing and intercompany agreements before trading
Expanding to the UK Through a Subsidiary
Why the UK Still Matters
The UK remains a strategic hub for international business. It offers a large and diverse market, a predictable legal system, and a deep pool of skilled talent. Its time zone bridges Asia and North America, which makes it particularly attractive for multinationals managing global operations. Despite Brexit, the country continues to maintain strong trade relationships and serves as a practical base for managing European or transatlantic operations. You should consider the UK as an ideal destination if you want to establish your business in Europe.
What Is a Subsidiary company is the UK?
A subsidiary company is a legally independent entity owned or controlled by a foreign parent company. It can trade, hire staff, and sign contracts in its own name. The parent company holds the shares and retains strategic oversight, but the subsidiary operates independently within UK law.
Parent vs. Branch
A branch is simply an extension of the parent company, whereas a subsidiary is its own legal entity. This distinction is crucial. A subsidiary allows greater control over UK operations, while a branch exposes the parent company directly to tax issues and legal risks in the UK. A subsidiary can own assets, enter contracts, and benefit from the UK’s double taxation treaties—advantages that make it the preferred choice for most foreign investors.
What are the Benefits of Setting Up a Subsidiary Company in the UK?
Key Advantages of Creating a Subsidiary Company
- Limited liability: A subsidiary company may limit the parent company’s liability
- Separate legal entity: Builds credibility and manages local risk
- Tax efficiency: Access to double taxation treaties, R&D incentives, and potential tax relief
- Operational flexibility: Full commercial freedom in the UK market
- Strategic commitment: Demonstrates serious long-term investment in the UK market, strengthening relationships with stakeholders, regulators, and potential business partners
- Talent and reputation: Easier to recruit, partner, and contract locally
Challenges to Consider
- Higher compliance costs than a branch
- More detailed reporting obligations
- Time and documentation for banking and tax registrations
Step-by-Step: How to Set Up a UK Subsidiary Business
First, do you actually need to open a subsidiary?
Before you begin, it’s worth asking whether you actually need a subsidiary to meet your objectives in the UK. Setting up a company is straightforward, but choosing the wrong structure can be costly and time-consuming to unwind. Some businesses achieve the same market access or presence through alternatives such as a representative office, or local employment solution.
At ALTIOS, we help international leaders assess their goals, level of investment, and risk exposure to determine the best setup for their UK operations—whether that’s a subsidiary or another, more flexible structure.
Step 1: Choose the Right Structure
The most common form of company for a UK subsidiary is the Private Company Limited by Shares (Ltd). This form provides limited liability and operational flexibility. You need at least one director who is a natural person, though they don’t have to live in the UK, and at least one shareholder, which can be either an individual or a corporate entity. The same person or entity can act as both.
Step 2: Prepare the Essential Documentation
To register, you must select a unique company name, provide a UK registered office address, and prepare the company’s constitutional documents: the Articles and Memorandum of Association. You’ll also need to list the directors, shareholders, and any Persons of Significant Control (PSCs). Even one company share is sufficient to register your company, and the minimum share capital is just £1, reflecting the UK’s pro-business environment.
Step 3: Register with Companies House
Companies are required to complete company registration with Companies House, which is the UK’s corporate registrar. Most online applications are processed within 24 hours, making the UK one of the fastest jurisdictions in Europe for company formation.
Step 4: Post-Incorporation Setup
After incorporation, the subsidiary must register with HMRC for taxes. The main tax for UK companies is corporation tax, and registration triggers the assignment of a Unique Tax Reference (UTR). Each year, the company must file accounts with Companies House, submit a Corporation Tax return to HMRC, and confirm its details in an annual confirmation statement.
If your annual taxable turnover exceeds £90,000, you will also need to register for VAT. If you hire staff, you need to register for PAYE (Pay As You Earn) and National Insurance, and comply with UK employment law, including pension obligations.
Banking and Financial Setup
Opening a subsidiary or a new business bank account remains one of the slower parts of the process. Because of strict anti-money laundering and “Know Your Customer” checks, it can take between three and six months to complete.
Banks typically request:
- Certificate of Incorporation
- Articles of Association
- Proof of registered address
- ID for directors and shareholders
- Parent company’s Certificate of Good Standing (if applicable)
Key tips:
- Several fintech banks now offer faster onboarding options for foreign-owned subsidiaries, but traditional banks may still be preferred for complex treasury operations or credit facilities.
- Appointing a UK-based Director can make the process of opening a bank account smoother and more efficient.
Key Tax Considerations
A UK subsidiary is a UK tax resident. This means it must file annual returns and pay tax on its worldwide profits, not just UK-sourced income. Deductible expenses include salaries, rent, professional advice, and approved capital investments.
VAT rules are straightforward but must be handled carefully. The company must file quarterly VAT returns, and businesses that import goods should pay attention to customs declarations and reclaim procedures.
Repatriating profits to the parent company is generally tax-efficient. Dividends can usually be paid without UK withholding tax, especially under double taxation treaties. Intercompany transactions must follow transfer pricing principles aligned with OECD standards. Formal agreements and benchmarking analyses are essential to demonstrate compliance and avoid penalties under the UK’s Diverted Profits Tax regime.
Key Information About Tax in 2025:
| Corporation Tax Rate | 19% on profits up to £50,000; 25% on profits above £250,000 – with marginal relief between thresholds. (UK Government) |
| VAT Registration Thresholds | £90,000 in taxable turnover over 12 months – registration is mandatory once this threshold is reached. (UK Government) |
| VAT Rate | 20% (UK Government) |
| National Insurance Rate | Employee, Class 1: 8% on earnings between the Primary Threshold and Upper Earnings Limit; 2% above that limit Employer, Class 1: 15% on earnings above the Secondary Threshold (UK Parliament) |
Legal and Governance Essentials
UK subsidiaries must follow the Companies Act 2006. While a company secretary is no longer mandatory for private limited companies, appointing one remains good practice to ensure proper governance, record-keeping, and compliance.
Regulatory Changes for 2025
- Economic Crime and Corporate Transparency Act 2023 gives Companies House broader powers to verify company information
- Directors’ identities will be digitally verified before incorporation
- By April 2027, all entities must file digital accounts
Foreign or overseas companies operating in the UK should also ensure compliance with the UK’s version of GDPR and register intellectual property rights locally to secure their trademarks and brand assets.
Subsidiary vs. Branch: What’s Best for You?
| Criteria | UK Subsidiary | UK Branch |
|---|---|---|
| Legal Entity | Separate company | Extension of parent |
| Liability | Limited | Parent liable |
| Taxation | UK tax resident | UK-source income only |
| Setup Time | 1 day | 4–6 weeks |
| Compliance | Must finale annual accounts for the subsidiary only | Must file annual accounts for both the UK branch and the overseas parent company |
For long-term growth or hiring plans, a standard UK company structure offers greater independence than a branch. A branch may be suitable for short-term or testing operations, and is often treated as a permanent establishment for tax purposes.
Tip – it’s important to choose the right structure from the start, depending on your long-term ambitions. Transitioning from a UK branch to a limited company later is possible, but it can be complex, as it effectively involves setting up a new entity and transferring your operations across.
Responsible Internationalisation: A Competitive Advantage
In 2025, for business owners focused on long-term sustainability, corporate responsibility is no longer optional; it is now a strategic advantage. Building a “responsible subsidiary” in the UK can strengthen both your brand and compliance posture, reducing risk and attracting new investors.
Integrating ESG principles into your UK operations is becoming essential. Foreign companies that start a subsidiary business in the UK must align their subsidiaries with the UK’s environmental and social frameworks, from low-carbon initiatives to fair-pay practices. This includes assessing the carbon footprint of supply chains and ensuring that governance standards meet the expectations of UK regulators and stakeholders.
Responsible internationalisation is not just compliance; it’s a growth driver. Companies that demonstrate ethical operations and environmental accountability often gain better access to local funding, partnerships, and tenders. This approach also helps support business continuity and compliance across multiple companies.
Rely on a Trusted Partner
With decades of experience helping companies grow internationally and thanks to a strong expert team based in London, ALTIOS provides end-to-end support for your subsidiary setup in the UK.
From evaluating the right structure and managing company registration to coordinating tax, HR, and banking requirements, our teams ensure your expansion is smooth, compliant, and strategically aligned with your group’s strategic objectives, from beginning to end.
As a trusted partner for global businesses, we combine local expertise with international reach, helping you navigate regulations, mitigate risks, and accelerate your market entry in the UK with confidence.
To benefit from comprehensive support and make your global business operations successful, contact us.
Frequently Asked Questions
What qualifies a company as a subsidiary?
In the UK, a subsidiary is a legally independent company, usually a Private Limited Company (Ltd), established by a foreign parent to operate locally while limiting liability. The parent company typically holds a majority of shares, retaining strategic control, while the subsidiary complies with UK laws, including registration with Companies House, appointment of directors, a registered office, and disclosure of persons of significant control. This structure allows international businesses to have a local presence, manage operations efficiently, and benefit from the UK’s regulatory and tax framework.
Can a foreigner set up a company in the UK?
Yes, a foreigner can set up a company in the UK. There are no residency or nationality restrictions for company directors or shareholders. This makes the UK an accessible and business-friendly location for international entrepreneurs.
Is a subsidiary the best solution for my business?
This is a crucial question that all businesses should ask themselves before making their first steps. Before setting up a UK subsidiary, it is important to clearly define your objectives. What are you aiming to achieve in the UK market? In some cases, a subsidiary may not be the most effective or cost-efficient option.
At ALTIOS, we help you assess your goals, evaluate the available entry strategies, and identify the structure that best supports your long-term growth. Whether it is a subsidiary or an alternative setup, we guide you through each step to ensure your expansion is strategic, compliant, and aligned with your business ambitions.
Do I need a UK director?
No, but each private company limited by shares must have at least one natural person as a director, and they don’t have to be UK-resident.
