I Want to Start a Business
Starting a business in the UK involves several important legal and tax steps. Getting them right from the beginning saves you time and money later. Here is the process in order.
Estimated timeline
Decide whether to trade as a sole trader, a partnership, or set up a limited company. Sole trading is simpler but offers no personal liability protection. A limited company means your personal assets are protected if the business runs into debt, but involves more administration and public disclosure. Most new businesses start as sole traders and incorporate later.
Sole traders must register for Self-Assessment with HMRC by 5 October after the tax year in which you started trading. Limited companies must be incorporated via Companies House (£12 online). Company directors must also register for Self-Assessment. If your taxable turnover will exceed £90,000 in any 12-month period, you must register for VAT.
Check whether you need any specific licences for your activity — food businesses need hygiene ratings, financial advice firms need FCA authorisation, and alcohol sales require a premises licence. Most businesses should also consider public liability insurance. If you take on employees, employers' liability insurance (minimum £5 million) becomes a legal requirement.
Open a business bank account (essential for limited companies; strongly recommended for sole traders). Set up accounting software or a spreadsheet to record all income and expenses from day one. Keep all receipts. HMRC's Making Tax Digital programme requires most businesses to keep digital records and submit quarterly updates.
As a sole trader, you pay Income Tax on profits via Self-Assessment plus Class 2 and Class 4 National Insurance. As a limited company, the company pays Corporation Tax (25% for profits over £250,000; small profits rate below that), and you take a salary and dividends personally. Seek professional advice on the most tax-efficient approach for your circumstances.
Frequently asked questions
Do I need an accountant?
When do I need to register for VAT?
Can I run a business from home?
Official bodies and resources
HM Revenue & Customs
GovernmentResponsible for collecting taxes, paying some forms of state support, and administering national insurance.
Companies House
GovernmentIncorporates and dissolves limited companies, registers company information, and makes it available to the public.
Information Commissioner's Office
RegulatorThe UK's independent authority for data protection and information rights, enforcing the UK GDPR and Data Protection Act 2018.
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