22 July 20267 min read
UK corporation tax hit 25% and dividend allowance is £500. A Bulgarian EOOD saves a higher-rate UK founder about £50k a year. Numbers, trade-offs, and when to actually move.
Brexit made UK founders re-evaluate their setup. A UK Ltd is still one of the most flexible corporate structures in Europe, but it lost its EU passport, and the tax picture has shifted. Corporation tax jumped to 25% for most profitable companies in April 2023, and the dividend allowance was cut to £500. A Bulgarian EOOD, sitting inside the EU with a 10% flat rate and 5% dividend tax, is now a serious alternative for a lot of UK-based digital businesses.
This is the 2026 comparison, with real numbers and honest trade-offs.
| Item | UK Ltd | Bulgarian EOOD |
|---|---|---|
| Corporate income tax | 19% up to £50k, tapered 19% to 25%, 25% above £250k | 10% flat |
| Dividend tax (higher rate individual, 2026) | 33.75% above £500 allowance | 5% |
| Combined tax on distributed profit (higher rate) | ≈50% | ≈14.5% |
| Minimum capital | £1 | BGN 2 |
| EU market access | third-country (no automatic passport) | full single market |
| Time to incorporate | 24 hours (Companies House online) | 10 business days |
| Cost to incorporate | ≈£50 | €390 all-in |
| VAT threshold | £90,000 | €51,130 |
| Annual accounts | required, filed at Companies House | required |
| Corporation tax return | CT600, annual | annual |
For a solo founder taking £100,000 out of the company, the UK route (£19,000 CT + roughly £24,000 dividend tax) leaves about £57,000 in hand. The Bulgarian route (€10,000 CIT + €4,500 dividend) leaves about €85,500. Currency aside, the delta is real.
Three things matter for a company owner deciding between UK and Bulgaria.
No more freedom of establishment. A UK Ltd can no longer automatically set up a branch across the EU or benefit from the EU cross-border merger directive. If you want a company with EU legal personality, it needs to be incorporated in an EU member state.
No more parent-subsidiary directive. Dividends flowing between a UK parent and an EU subsidiary lost automatic withholding tax exemption. Bulgaria still applies zero withholding to UK residents under the DTT, but the mechanics changed.
VAT and IOSS friction. Selling B2C into the EU from a UK company means IOSS or the OSS scheme through a Member State of Identification. A Bulgarian EOOD handles this natively.
Domestic UK business. If your customers are UK-based, invoicing them from a Bulgarian company adds no value and creates admin. Stay UK.
HMRC familiarity. UK accountants, UK banks, UK payment processors all understand a UK Ltd. Even a competent Bulgarian accountant is not a substitute if your ecosystem is British.
R&D tax credits. The UK R&D regime, even after the 2024 reforms, is meaningfully generous for genuine software R&D. Bulgaria has no equivalent.
EIS/SEIS and share option schemes. If you plan to raise UK angel/VC money, EIS/SEIS eligibility requires a UK trading company. EMI options are UK-only. Do not throw these away lightly.
Financial services and FCA regulation. Regulated fintech needs FCA authorisation. That requires a UK entity.
International digital services. SaaS, agencies, consulting, IP licensing to customers outside the UK. The tax delta is enormous.
EU-based customers. Full single market access, standard EU invoicing, no post-Brexit friction.
IOSS and cross-border e-commerce. Cleaner than running IOSS through a UK company.
Founders who want to actually take money out. 5% dividend tax versus 33.75%.
Founders willing to relocate. If you are genuinely planning to move to a lower-tax jurisdiction, Bulgaria is one of the smoothest EU options.
Yes, if you want the full benefit. Here is why.
If you stay UK tax-resident and own a Bulgarian EOOD, HMRC will:
Net result: you pay slightly less than a pure UK setup because of the small 5% credit, but you pay UK admin costs on top and take on transfer-pricing risk. Not worth it.
To capture the Bulgarian rate, you need to move. Bulgarian tax residency requires more than 183 days a year in Bulgaria or centre of vital interests. UK non-residency requires you to satisfy the Statutory Residence Test in the correct direction: fewer than the applicable day count, sufficient ties test failed, and no work-days above the threshold.
Full mechanics: Bulgaria Tax Residency 2026.
Unlike Germany, the UK does not have a general exit tax on unrealised gains for individuals leaving with company shares. That is good news. Two things to still watch:
Temporary non-residence rules. If you leave the UK, take dividends or realise gains while non-resident, and then return within five complete UK tax years, those dividends and gains can be taxed retrospectively on your return. Plan to stay away long enough.
Company migration. Moving a UK Ltd's tax residency abroad (rather than setting up a fresh Bulgarian EOOD) triggers a deemed disposal of the company's assets. Almost always cleaner to start fresh in Bulgaria and wind down the UK Ltd, unless the UK Ltd has significant residual value.
Both the UK and Bulgaria run their own VAT regimes.
If most of your customers are EU-based, running VAT through a Bulgarian entity is materially simpler than running IOSS through a UK company post-Brexit.
More detail: Bulgaria VAT Registration: Thresholds and Timing.
The UK's employer's NI at 15% (from April 2025) combined with employee NI and income tax makes drawing significant PAYE salary expensive. Most UK founders take a low salary (£12,570 to keep NI history) plus dividends.
Bulgaria's employer social contributions are 18.92% capped at a BGN 4,500 monthly base. Total employer + employee contributions on a €30,000 annual director salary come in around €7,000 combined, versus UK employer NI alone on the same salary being much higher because the UK cap is much higher.
Full breakdown: Bulgaria Payroll 2026.
Profile A: UK-based SaaS founder, £150k profit, mostly US and EU customers. Currently paying £30k+ in corporation tax and £30k+ in dividend tax if distributing. Realistic tax saving from moving to Bulgaria and relocating: about £50k per year. Setup cost recovered in the first quarter.
Profile B: UK consultant, £80k profit, mainly UK clients, lives near family. Not a good candidate. Client base is UK, cannot realistically relocate, tax saving after HMRC clawback is minimal, complexity is real. Stay UK.
Some founders run a UK Ltd and a Bulgarian EOOD in parallel:
This works if both entities have real substance and inter-company transfer pricing is at arm's length. It doubles admin costs, so only worth it above roughly £500k combined revenue.
If you are UK-based and seriously considering the move, three things matter: your genuine ability to relocate, the size of your profit pool, and your customer mix. Start with the tax calculator to see the delta on your actual numbers.
Related reading:
Yes. Owning UK company shares while Bulgarian-resident is fine. Just be careful: if management and control move to Bulgaria, the UK Ltd can become dual-resident and you will need to invoke the tie-breaker in the UK-Bulgaria DTT.
Yes. Bulgarian dividends paid to a UK-resident individual are taxed at 5% in Bulgaria, with a credit against UK dividend tax. If you have moved to Bulgaria, only the 5% Bulgarian rate applies.
Depends on your ties. Under the Statutory Residence Test, someone with no UK home and minimal UK ties can be non-resident with as few as 45 days in the UK per tax year. Someone with a UK home, family, and workdays may need to keep it under 16 days. Get advice.
Technically yes via cross-border conversion, but it triggers a deemed disposal of assets for UK tax purposes. Almost always cleaner to set up a fresh Bulgarian EOOD.
UK pension contributions are made from UK earnings. Once you are Bulgarian tax-resident with Bulgarian earnings, UK pension contributions become impractical. Bulgaria has its own private pension system; discuss with your Bulgarian accountant.
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