Establishing a business in the United Kingdom

The UK is one of the quickest places in Europe to start: a sole trader can begin trading the same day, and a limited company is usually registered within 24 hours of an online application. The work is in choosing the right form and keeping up with HMRC and Companies House afterwards. 1. Choose the legal form. Sole trader. You are the business. No registration fee, minimal paperwork, profits taxed as your personal income through Self Assessment. You are personally liable for the business's debts. Right for freelancers, tradespeople and anyone testing an idea. Private limited company (Ltd). A separate legal person owned by shareholders and run by directors; your liability is limited to what you put in. It pays Corporation Tax on its profits and you take money out as salary, dividends or both. More filing (annual accounts, confirmation statement), more credibility with larger customers, and the usual choice once you hire, take a lease or bring in partners. Partnership or LLP. Two or more owners. An ordinary partnership is like joint sole traders (each partner is liable); a limited liability partnership (LLP) is registered at Companies House and limits liability like a company. Common for professional practices. 2. Register the business. Sole trader: tell HMRC you are self-employed by registering for Self Assessment. The deadline is 5 October after the end of the tax year (6 April to 5 April) in which you started. You will get a Unique Taxpayer Reference (UTR) and file a tax return every January. Limited company: register at Companies House online. You need a company name that is not already taken, at least one director aged 16 or over, at least one shareholder (the same person is fine), a registered office address in the UK part where the company is registered (England and Wales, Scotland or Northern Ireland; a PO box is not enough), a registered email address, a memorandum and articles of association (the model articles are free and fine for most), a statement of capital and the people with significant control (PSC). The online fee is 100 pounds since 1 February 2026 (it was 50 pounds before). Most applications are approved within 24 hours. Companies House then tells HMRC, which sends the company's UTR to the registered office. Identity verification: since 18 November 2025 every director and PSC must verify their identity with Companies House, either directly through GOV.UK One Login or through an authorised agent (an ACSP, typically a formation agent, accountant or solicitor). New directors verify before appointment; do it before you file. 3. Register for tax. Corporation Tax: a new company must register with HMRC within 3 months of starting to trade. Rates for 2026/27: 19 percent on profits up to 50,000 pounds, 25 percent above 250,000 pounds, with marginal relief in between. VAT: registration is compulsory once taxable turnover in any rolling 12 months passes 90,000 pounds (unchanged from April 2026; deregistration at 88,000). You can register voluntarily below that, which makes sense if your customers are VAT-registered businesses and you want to reclaim VAT on costs. The standard rate is 20 percent. PAYE: register as an employer with HMRC before the first payday if you hire anyone, including yourself as a director drawing a salary above the lower earnings limit. Employer National Insurance is 15 percent on pay above 5,000 pounds a year; the Employment Allowance lets most small employers offset the first 10,500 pounds a year of it. Making Tax Digital for Income Tax: from April 2026 sole traders and landlords with qualifying income above 50,000 pounds keep digital records and send quarterly updates to HMRC through compatible software; the threshold drops to 30,000 pounds from April 2027 and 20,000 from April 2028. Pick your bookkeeping software with this in mind. 4. Open a business bank account. A limited company needs its own account; a sole trader is not obliged to but should keep business money separate. Banks will ask for the certificate of incorporation, proof of the registered office and identity documents for directors and PSCs. Online banks often open accounts in days; high-street banks can take weeks for non-resident directors. 5. Check licences, insurance and premises. Most businesses need no licence, but food, alcohol, taxis, childcare, financial services, waste, security and street trading do; the local council and GOV.UK's licence finder tell you which. Employers must hold employers' liability insurance (at least 5 million pounds of cover) from the first employee. Business rates apply to most commercial premises; small business rate relief can bring them to nil for a single small property. 6. Keep up with the filings. A limited company files a confirmation statement every year (online fee 50 pounds since February 2026), annual accounts at Companies House within 9 months of the year end, and a Corporation Tax return with HMRC within 12 months, paying the tax within 9 months and a day. A sole trader files a Self Assessment return by 31 January and pays on account in January and July. Late filing penalties start automatically, so put the dates in a calendar on day one. 7. Non-residents. You do not need to live in the UK to own or direct a UK company, and there is no UK-resident director requirement, but you do need a UK registered office and the identity verification above, and banks are stricter with non-resident owners. Working in the UK yourself is a separate visa question. What it costs to start, roughly: a sole trader, nothing beyond your accountant; a limited company, 100 pounds to Companies House plus 50 pounds a year, an accountant from a few hundred pounds a year for simple accounts, and a registered office service if you do not want your home address public. Where to get help: the accountants and solicitors listed under this guide work with UK start-ups; the government's own guidance on GOV.UK is accurate and free; the British Business Bank's Start Up Loans scheme lends up to 25,000 pounds per founder with free mentoring. Figures checked September 2026. Fees, thresholds and rates change with each Budget and each Companies House fee review; confirm them with a licensed professional before you rely on them.