What do you need to start a business in the UK?

Legally, very little. Sole traders register with HMRC for self-assessment; limited companies register with Companies House. Practically, a one-person service business needs a legal structure, a business bank account, basic bookkeeping, professional insurance, a contract template and a way of being found by clients. Setup cost £200 to £1,500 depending on structure and tooling.

How much does it cost to set up a limited company?

Companies House charges £50 for online incorporation. Add company formation services that handle the paperwork and registered office (£20 to £100). Most one-person companies budget £500 to £1,000 for first-year setup including accounting software, insurance, and the first accountant fees, then £80 to £200 per month for ongoing operations.

Do I need a business bank account?

Sole traders are not legally required to have one, but mixing personal and business banking creates bookkeeping problems and HMRC dislikes it. Limited companies must have a separate business bank account because the company is a separate legal entity. Either way, a separate account is the practical right answer from day one.

When do I need to register for VAT?

Mandatory at £90,000 of taxable turnover (April 2024 threshold). Voluntary VAT registration below that is common for B2B businesses because you can reclaim VAT on expenses and clients can reclaim the VAT on your invoices. For consumer-facing businesses below the threshold, voluntary registration usually adds cost without benefit.

UK Business Startup Checklist (2026): Day 1 to Day 90

Stage 1: decide the structure (days 1–3)

Decide sole trader vs limited company. The tax comparison and broader trade-offs cover both sides. Most consultancies and higher-rate freelancers benefit from a limited company; smaller and consumer-facing businesses often stay sole trader.
Choose a name. For a limited company, check name availability at Companies House. Avoid restricted words (Bank, Solicitor, National) unless authorised.
Decide on a registered office address. If you do not want your home address on the public register, use a service address (Companies House charges £50 to confirm the company; the company formation provider usually offers a service address for an annual fee).

Stage 2: register the business (days 3–7)

Sole trader: register for self-assessment with HMRC online. Free, takes 10 minutes. HMRC issues a UTR (Unique Taxpayer Reference) by post within two weeks.
Limited company: incorporate at Companies House (£50 directly) or through a formation service. The Your Company Formations incorporation service packages registration with a registered office, share certificates and other first-day paperwork.
Register for VAT if turnover will exceed £90,000 or voluntary registration is beneficial.
Register as an employer with HMRC if you will pay yourself a salary (yes for most limited companies).

Stage 3: open the bank account (days 7–14)

Open a business bank account. UK options include traditional banks (Barclays, NatWest, HSBC) and digital-first providers (Tide, Starling, Monzo Business, Mettle). Digital banks open in days; traditional banks in two to six weeks.
Set up automated rules: a separate instant-access savings account, with 25 to 30% of every incoming invoice transferred in for tax. The tax reserve is the most common cashflow shock in year two.
Apply for a business credit card if you expect significant expenses. Useful for cashflow and for separating business spending cleanly.

Stage 4: accounts and bookkeeping (days 14–21)

Choose accounting software: Xero, FreeAgent and QuickBooks are the standard UK options. Cost £15 to £40 per month depending on features. Connect the business bank account so transactions flow in automatically.
Set up a chart of accounts. Most software offers a UK template suitable for service businesses.
Appoint an accountant. For sole traders, an online accountant on a fixed fee (£300 to £800 per year) handles self-assessment. For limited companies, expect £600 to £1,800 per year covering accounts, corporation tax, payroll and VAT returns.

Stage 5: insurance (days 14–21)

Professional indemnity insurance: covers claims that your work caused financial loss. UK premiums start around £200 to £600 per year for a one-person service business.
Public liability insurance: covers third-party injury or property damage. £100 to £200 per year. Often bundled with professional indemnity.
Employers’ liability insurance: mandatory if you employ anyone (including yourself in some limited company contexts).
Cyber insurance and business interruption cover for higher-risk profiles.

Stage 6: contracts and templates (days 21–28)

A standard services agreement template, covering scope, payment terms, IP ownership, confidentiality, limitation of liability and termination. Use a template from a reputable UK source or get an employment-lawyer to draft one (£500 to £1,500 one-off).
A standard non-disclosure agreement (NDA) for early conversations.
Invoice template with all the legal details (limited company number, VAT number if registered, payment terms, bank details).

Stage 7: web presence (days 28–60)

A simple one-page website with positioning, services, contact and at least one piece of proof (case study, testimonial, prior work). WordPress, Webflow or a static HTML page works fine. Domain plus hosting £30 to £200 per year.
LinkedIn profile updated to reflect the new business.
Email address on the business domain (looks more professional than a Gmail address for B2B clients).

Stage 8: first clients (days 30–90)

Build a target prospect list of 15 to 30 people. Prioritise warm contacts: ex- employers, ex-colleagues, network introductions.
Start the conversations. Aim for three live discussions by day 60.
Sign the first engagement. Price at the lower end of your range to win it; raise on subsequent projects.
Deliver, invoice, ask for a referral. Repeat.

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Frequently asked questions

What do you need to start a business in the UK?: Legally, very little. Sole traders register with HMRC for self-assessment; limited companies register with Companies House. Practically, a one-person service business needs a legal structure, a business bank account, basic bookkeeping, professional insurance, a contract template and a way of being found by clients. Setup cost £200 to £1,500 depending on structure and tooling.
How much does it cost to set up a limited company?: Companies House charges £50 for online incorporation. Add company formation services that handle the paperwork and registered office (£20 to £100). Most one-person companies budget £500 to £1,000 for first-year setup including accounting software, insurance, and the first accountant fees, then £80 to £200 per month for ongoing operations.
Do I need a business bank account?: Sole traders are not legally required to have one, but mixing personal and business banking creates bookkeeping problems and HMRC dislikes it. Limited companies must have a separate business bank account because the company is a separate legal entity. Either way, a separate account is the practical right answer from day one.
When do I need to register for VAT?: Mandatory at £90,000 of taxable turnover (April 2024 threshold). Voluntary VAT registration below that is common for B2B businesses because you can reclaim VAT on expenses and clients can reclaim the VAT on your invoices. For consumer-facing businesses below the threshold, voluntary registration usually adds cost without benefit.

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