Why your small business pays a higher tax rate than a multinational

A profitable UK company pays corporation tax of up to 25%. Several of the world's largest companies pay far less on their profits, legally. The difference is not effort or cleverness. It is access to tools that only exist at a scale you will probably never operate at.

The gap, in plain numbers. Take a self-employed electrician trading through a small limited company on about £75,000 of profit. Once corporation tax and the tax on drawing that profit out as income are counted, the all-in effective rate is about 26.9%. One of the world's largest online retailers reported an effective tax rate of about 13.5% for 2024 in its own filed accounts. That is roughly double the rate the giant pays.

Two things we will not fudge, because the honesty is the whole point:

• The 26.9% is an all-in rate. It includes the tax on taking the money out as income, which a multinational's headline figure does not. Measured like for like, on corporation tax alone, the small company sits nearer 23%. Still well above the giant. Just not double.
• The multinational figure is a global effective rate, not a UK-only one. We say so every time, because comparing a worldwide rate to a single country's is exactly the trick we are here to expose, not to copy.

Why the gap exists, and why it is legal. Profit gets moved to where the tax is lowest, through transfer pricing, royalties paid to offshore-held intellectual property, and conduit jurisdictions. None of it is illegal. It is avoidance, not evasion. It is the rules working exactly as they were written.

Why you cannot do the same. To use those tools you would need genuine cross-border operations, valuable intellectual property you can license across borders, and a tax team whose cost only pays for itself far above the profit you will ever make. The toolkit is not from you. It is structurally out of reach.

So who should you be cross with? Not the companies. They are following the law. The law. Governments wrote a tax code that rewards scale and mobility and asks the local trader to make up the shortfall. They can change it. So far, mostly, they have not.