- Sole trader registration with HMRC is free.
- Registering a limited company costs £100 online, and Companies House typically completes incorporation in 3 hours
- Using your home address as your registered office makes it permanently available on the Companies House public register.
- Name anyone owning or controlling over 25% of the ltd on the PSC register, even if they aren’t a director
- A sole trader can pay up to 45% Income Tax on profits. A director drawing a low salary topped up with dividends can pay significantly less for the same amount.
- You have 30 days to register for VAT once you breach the £90,000 threshold. The clock starts from the day you cross it, not the day you realise.
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Watch our step-by-step guide to setting up a limited company in the UK
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hello there my name's Ian from your company formations where we make forming your company effortless Step One is choosing a unique company name now when choosing a name for your limited company it's important to ensure that the name is not already in use by another company it's also important to know that certain words and expressions are restricted and cannot be used in a company name without specific permissions for example words such as Royal National British government and University can only be used with permission additionally any names that are considered to be offensive or misleading in any way are prohibited now that you know what options are available you need to run a company's house company name check on companies house's name availability Checker or by using our online name checking service simply enter the name you wish to use and it will alert you as to whether it's available when you've chosen the name you'll also have to check if it's similar to other existing companies to avoid confusion you can do this by doing a quick Google search as well as looking at other social media for anything similar also make sure the domain name is available as there's nothing worse than setting up a company and finding out your domain name is taken and it's an extortion of price to buy it it's important to choose a name that's catchy memorable and easy to pronounce as it will help you with your marketing and branding efforts in the long run it's also a good idea to consider the future growth and expansion of your company when choosing a name step two is choosing your package once you've chosen your name using our site you can choose which package you wish to buy now there are quite a few options here and choice will really come down to what you actually require for your business and recommend the package would be the fully inclusive package this includes many features including a confirmation statement a trading address where you can have non-government letters addressed to vat registration registered and directors addresses in London ec1 a free dot Co dot UK domain name the three hour online formation for those who are in a hurry to get moving all the fees of course associated with incorporating a company a free accountancy consultation free access to the online company manager portal digital and printed certificates for everything you need and even a free 75 pounds Google AdWords voucher but not only that you also have the option of up to 155 pounds cashback when you decide to use some of our partner services of course the choice is yours and you can see all the packages on the compare packages page we also have packages for a company limited by guarantee property management companies charities right to manage companies limited liability Partnerships and public limited companies as well and these can be found by clicking on the relevant title on the site navigation and don't worry if you're not from the UK we have a package for international formations as well once you've chosen your package you'll be whisked over to the checkout where you can input your card details and create an account so you can purchase your package ready to move on to the next step in this step we're going to input all the information for your company to be registered now when you go to the next page there's another more comprehensive video so you can refer to that as well if needed if you have any issues but don't worry because our intuitive system helps you to move through the process as step by step so you don't have any errors and you can always contact us if you have any difficulties whatsoever and will be more than happy to help company particulars is the next step and we need to find out more about your company so fill in the details here and use the drop down boxes to add your company info and jurisdiction this is where you want the company to be formed and don't forget very important add a company ending to your name for example LTD or LLP that way you'll be able to move on to the next step next up are your address details if you added a London office to your package you don't need to worry about this next step but if you didn't make sure to fill in the address of your company now the forwarding address is used for any small packages or mail and must be your address but don't worry this won't be shown on company's house next up is add an officer on this page we need to fill out all the company director share details and PSC which is person with significant control the company needs at least one director one shareholder and one PSC you can take these roles yourself as a single entity or they can be spit by multiple people in this case we're going to be adding one person you can now choose their position in the company you can take multiple boxes if they're relevant in this case we will tick director shareholder and PSC because they hold the majority they are therefore the person of significant control but of course this will depend on your company's structure as you choose each option you'll notice a new tab open up for each new piece of information required when you're finished with this choose next to automatically move on to the next tab here you'll need to fill in the details of the director along with some authentication questions next up is the director's service address or what correspondence address if you purchased a package with director's service address you do not need to input anything here you will only need to add a forwarding address for the director next up nature of control here you use the drop down box to select how many shares you will have either more than 25 but less than 50 is for Partnerships equally splitting shares between the two people more than 50 but less than 75 this is when one person holds the majority of the shares and finally 75 or more which is full ownership after this you can answer yes or no to any of the questions below depending on your circumstances now if you answer yes an additional box will appear so you can fill in that information also now once all the information is filled out click the next button and now here you have to put the share class you have allocated the generic values of the share are one share equals one Great British pound and they're already allocated and most people will use these but you can change these based on your own preferences and after taking legal advice if needed now hit save to continue to the next section in this final document section the majority of the companies we register lead the default free option however if you have your own ideas for the memorandum and articles of Association you can customize our mem and arts for as little as 9.99 plus bat just make sure that you use the structure of the correct templated document that can be downloaded at companies house now additional documents at this point are at your discretion now finally you have the option to opt in to some of our partner services this is where you can get some valuable cashback also depending on the services you choose now at this stage you can add additional Services as well that may be required by simply clicking the add button and these will be added to your cart and these can also be added at a later date once the company has been formed by simply logging into your portal the next page shows you all the information you submitted for one final check so make sure to double check before submitting and finally the last page gives you an invoice for the services you've prepaid for and if you've chosen any extra Services during the process you can pay for those now all you have to do now is fill out the boxes at the bottom of the page for kyc regulations tick the agree to tease and C's box and submit and your job is done now we do need to contact you a little later to verify your photo ID and registered address and once those have passed you can sit and relax knowing you have officially registered your company and that's it you've successfully formed a UK limited company congratulations and don't forget as a limited company you are required to keep accurate records of your financial transactions and submit annual accounts to companies house but don't worry because as we selected the fully inclusive package we get a free accountancy consultation which will really come in handy and you can ask any questions directly to put your mind at ease thanks for watching and feel free to put any questions that you have in the box below and make sure to share this video with friends who are thinking of starting a business my name's Ian from your company formations and I'll see you on the next video bye bye for now
Choose the Right Business Structure to Protect Your Personal Assets
There are three main legal structures for new business owners in the UK: operating as a sole trader, forming a private limited company, or forming a limited liability partnership (llp). Each business structure in the UK carries different legal, tax, and administrative obligations.Operate as a Sole Trader for Simplicity and Low Admin Cost
A sole trader is a self-employed individual who owns and runs their business as a single legal person. You and the business are legally the same entity. Sole traders pay Income Tax and National Insurance on business profits through an annual Self Assessment tax return filed with HMRC. The key risk is unlimited personal liability: if the business incurs debts it cannot pay, your personal assets, including your home, are at risk.Form a Private Limited Company for Liability Protection and Credibility
A private limited company (Ltd) is a separate legal entity from its owners, governed by the Companies Act 2006. Its owners (shareholders) and directors are legally distinct from the company itself. The company pays Corporation Tax on its profits, and directors pay Income Tax on salaries and dividend tax on any dividends they draw. The core benefit of forming a private limited company is limited liability: your personal assets are protected from business debts. Business owners who want to grow a business, secure investment, or build professional credibility most often choose this structure.Form a Limited Liability Partnership for Professional Partnerships with 2+ Members
An limited liability partnership is governed by the Limited Liability Partnerships Act 2000. An LLP requires at least two members and must be registered with Companies House. Like a private limited company, it is a separate legal entity from its members. Unlike a limited company, an LLP pays no Corporation Tax; profits flow directly to members, who each pay Income Tax on their share. An LLP suits professional service firms such as law practices, accountancies, and consultancies where two or more founders want liability protection without a corporate ownership structure.Sole Trader vs Limited Company vs LLP (Liability, Tax, and Admin Costs)
| Feature | Sole Trader | Limited Company | LLP |
|---|---|---|---|
| Personal Liability | Unlimited — personal assets are at risk | Limited — personal assets are protected | Limited — personal assets are protected |
| Legal Status | Owner and business are one entity | Separate legal entity from its owners | Separate legal entity from its members |
| Tax on Profits | Income Tax via Self Assessment | Corporation Tax (19–25%) | Income Tax on each member’s share |
| Public Record | No public filing of personal details | Directors and PSC details on public record | Members listed on public record |
| Admin Burden | Low — one Self Assessment return per year | High — Annual Accounts, Confirmation Statement, CT600 |
Medium — Annual Accounts and Confirmation Statement |
| Best Suited For | Low-risk, early-stage, or low-profit operations | Growth, investment, and professional credibility | Professional partnerships with two or more founders |
Calculate Your Costs: Registration Fees and Annual Compliance by Structure
| Cost | Sole Trader | Limited Company | LLP |
|---|---|---|---|
| Registration Fee | Free | £100 online / £156 same-day | £100 online |
| Annual Accounts | Not required | Required — 9 months after financial year-end | Required |
| Confirmation Statement | Not required | £34 per year | £34 per year |
| Corporation Tax | Not applicable | 19% on profits up to £50,000 / 25% on profits over £250,000 | Not applicable |
| Income Tax on Profits | 20–45% depending on total income | On salary and dividends only | 20–45% on each member’s share |
Why Most Founders Choose a Limited Company for Tax Efficiency
For most new business owners, the choice comes down to sole trader or private limited company. A limited company typically becomes more tax-efficient once annual profits exceed £40,000, because directors can draw a combination of a low salary and dividends, which attracts a lower overall tax rate than Income Tax on the same amount as a sole trader. An LLP is the right choice when two or more professional founders want the liability protection of a separate legal entity but prefer profit to flow directly to members rather than through Corporation Tax. If you are starting alone or with one other person in a non-professional service context, a private limited company is almost always the more appropriate structure.Register as a Sole Trader with HMRC Within 3 Months of Trading
You must register as a sole trader with HMRC within three months of starting to trade. Failure to register on time can result in a penalty from HMRC.Get Your 10-Digit UTR by Registering for Self Assessment on GOV.UK
Complete your registration using the GOV.UK Register for Self Assessment online service. HMRC will issue you a 10-digit Unique Taxpayer Reference (UTR), which you will use to file your annual Self Assessment tax return and pay Income Tax and National Insurance on your profits.Prepare for Making Tax Digital (MTD) Deadlines Starting in 2026
HMRC is introducing Making Tax Digital (MTD) for Income Tax on a phased basis. Sole traders with qualifying income over £50,000 must use MTD-compliant software and submit quarterly updates to HMRC from . The threshold drops to £30,000 from and to £20,000 from . You will still pay tax in the same way, but you must report your income and expenses digitally quarterly rather than annually.Keep Business Records for 5 Years After the Tax Year Ends
You have a legal duty to keep accurate records of all business income and expenses. Acceptable records include receipts, bank statements, invoices, and till rolls. You must keep these records for at least five years after the 31 January submission deadline of the relevant tax year. For example, keep all records for the / tax year until at least .Cash Basis Accounting Is the New Standard
Since , cash basis accounting has become the default method for all eligible sole traders and partnerships in the UK, regardless of their annual turnover. With traditional accounting, you pay tax and claim expenses based on the date you invoice a customer, regardless of when you receive payment. With cash basis, you pay tax based on when money actually enters or leaves your account. Cash basis can defer your tax liability in years where you invoice late in the tax year but receive payment in the next. However, it has limitations: you cannot offset losses against other taxable income, and you cannot claim more than £500 in interest costs. For businesses with long payment terms or significant losses, traditional accounting provides more accurate financial reporting and loss relief.Register Your Private Limited Company with Companies House and HMRC
Register your private limited company with two government bodies: Companies House (for incorporation) and HMRC (for taxation). Both registrations carry legal deadlines. Most business owners complete the company registration process online, and Companies House can incorporate your company, making it ready to trade within 24 to 48 hours.Check Your Proposed Name on the Companies House Register
Your proposed name must be unique and must not be too similar to an existing name on the Companies House register. It cannot include terms such as Ltd, LLP, or PLC unless the structure matches, and it cannot imply a connection to government bodies or use sensitive words without approval. Use the Companies House company name checker to confirm whether your preferred company name is available before you proceed.Incorporate with Companies House Using Form IN01
File the incorporation application (formIN01) online with Companies House to register your business. The standard online fee is £100, and the process typically takes 24 to 48 hours. Companies House offers a same-day service for £156. Most private limited companies are incorporated as companies limited by shares, meaning shareholders own a portion of the company in proportion to the shares they hold. To complete the company formation process, you will need to provide:
- A unique company name
- A UK registered office address
- At least one company director aged 16 or over, and at least one shareholder
- Articles and Memorandum of Association
- Details of your Persons with Significant Control (PSC), to comply with the Economic Crime and Corporate Transparency Act, a PSC is anyone who owns or controls more than 25% of shares or voting rights
Verify Your Identity with Companies House Before You File
From autumn 2025, Companies House requires all new and existing company directors, People with Significant Control, and anyone filing on behalf of a company to complete identity verification. This applies to all UK and non-resident directors. You can verify your identity directly through the GOV.UK One Login service using a valid photo ID such as a passport or driving licence. Alternatively, you can authorise a Companies House-authorised agent, such as Your Company Formations, to verify on your behalf using the Authorised Corporate Service Provider (ACSP) route. After the deadline, directors who remain unverified cannot be appointed or make filings. If you are forming a company, complete identity verification before or immediately after incorporation to avoid any restrictions on your ability to file.Register for Corporation Tax Within 3 Months of Trading
Your company must register for Corporation Tax with HMRC within three months of starting to trade. You can do this through your HMRC online account using your company’s Unique Taxpayer Reference, which Companies House sends after your company has been incorporated. The Corporation Tax rate is 19% on profits up to £50,000 and 25% on profits over £250,000, with marginal relief available on profits between those thresholds.Register for PAYE if Salaries Exceed £6,396 per Year
If the company pays any company director or employee a salary above the Lower Earnings Limit (£6,396 for the / tax year), you must register as an employer with HMRC and operate a PAYE payroll scheme. Most directors choose to pay themselves a low salary below the National Insurance threshold and supplement their income with dividends to reduce their overall tax liability.Open a Separate Business Bank Account to Meet Legal Requirements
Opening a business bank account is a legal requirement for a private limited company because it is a distinct legal entity from its directors and shareholders. Mixing company funds with personal accounts is a compliance risk and makes accounting significantly harder. As a sole trader, you are not legally required to hold a separate account, but keeping personal and business finances separate is essential for accurate Self Assessment reporting to HMRC.Register Your LLP Online with Companies House Using Form LL IN01
Register your LLP with Companies House before you start trading. The online registration fee is £26, and the process typically takes 24 to 48 hours. To register an LLP, you will need at least two designated members, a registered office address in the UK, and a completed incorporation document (formLL IN01). Members should also prepare a Members’ Agreement, the LLP equivalent of a company’s Articles of Association, setting out how profits are shared, how decisions are made, and what happens if a member leaves. Once registered, each member must register individually with HMRC for Self Assessment and pay Income Tax on their share of the LLP’s profits. You can register an LLP directly through the Companies House online service.
Register for VAT Within 30 Days of Reaching £90,000 Turnover
VAT registration is mandatory once your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period. You must register your business for VAT within 30 days of breaching the threshold. HMRC will issue a VAT registration number, and you must charge VAT on the goods and services you supply from your effective date of registration. Voluntary registration is available before you reach the threshold. Registering early allows you to reclaim VAT on business purchases, reducing your net costs when both your suppliers and business customers are VAT-registered. All VAT-registered businesses must keep digital VAT records and submit VAT returns using HMRC-approved Making Tax Digital software. MTD for VAT has applied to all VAT-registered businesses since April 2022.Meet Your 3 Annual Compliance Deadlines for Limited Companies to Avoid Penalties
Forming a limited company is the start, not the end, of your legal obligations. If you miss any of your three annual filing deadlines, you will face automatic financial penaltiesFile Your Confirmation Statement Within 14 Days of Your Anniversary
A Confirmation Statement is an annual return to Companies House confirming that your company’s registered details are accurate and up to date. You must file it within 14 days of the anniversary of your company’s incorporation. The filing fee is £34. Missing the deadline does not trigger an immediate financial penalty, but persistent failure to file can lead to Companies House striking off your company. YCF’s Confirmation Statement filing service ensures you never miss the deadline.File Annual Accounts Within 9 Months of Your Financial Year-End
Annual Accounts report your company’s financial activity for the year. Private limited companies must file with Companies House within nine months of their financial year-end. Late filing carries automatic financial penalties: £150 for accounts up to one month late, £375 for one to three months late, £750 for three to six months late, and £1,500 for accounts more than six months late. Penalties double if your accounts are late in two consecutive years.File a Company Tax Return (CT600) with HMRC
Your company must file a Company Tax Return (formCT600) with HMRC within 12 months of the end of your accounting period. A company must pay Corporation Tax within nine months and one day of the accounting period end, which is earlier than the CT600 deadline. Late payment attracts interest from HMRC from the day after the payment deadline.
Avoid Automatic Penalties for Missing Filing Deadlines
Companies House issues automatic financial penalties for late Annual Accounts. HMRC charges interest on late Corporation Tax payments from the first day after the due date. Persistent failure to file a Confirmation Statement leads to Companies House initiating strike-off proceedings, which dissolve the company and transfer any remaining assets to the Crown. To reinstate the company, you must complete a formal application process that costs time and money.Frequently Asked Questions
When do I need to register for VAT?
You must register for VAT with HMRC once your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period. File your registration within 30 days of breaching the threshold. You can also register voluntarily before reaching it, which allows you to reclaim VAT on business purchases. Voluntary registration is particularly useful if you sell primarily to VAT-registered businesses, as they can reclaim the VAT you charge, making your net pricing more competitive.
Can I register a limited company from my home address?
Companies House accepts a home address as a registered office. However, your registered office address is publicly available on the Companies House register, meaning anyone can search and find it. Using a registered office address service gives your company a professional city-centre address that meets the legal requirements without revealing where you live. YCF offers a registered office address service that you can add at the point of formation or at any time after.
Can I change from a sole trader to a limited company later?
Many business owners start as sole traders and incorporate once their profits grow or their risk profile changes. The process involves registering a new limited company with Companies House, transferring your business assets and contracts to the new entity, and notifying HMRC. You do not lose your trading history by incorporating, but you must close your Self Assessment registration as a sole trader and register your company for Corporation Tax separately. YCF can handle the company formation as part of the transition.
What happens if I miss a Companies House filing deadline?
Companies House issues automatic financial penalties for late Annual Accounts, starting at £150 for accounts up to one month late and rising to £1,500 for accounts more than six months late. Penalties double if accounts are late in two consecutive years. Missing a Confirmation Statement deadline does not carry an immediate financial penalty, but it can trigger strike-off proceedings, which dissolve the company and transfer its assets to the Crown. HMRC charges interest on late Corporation Tax payments from the day after the payment deadline. YCF’s compliance filing services cover both the Confirmation Statement and Annual Accounts to ensure you never face these penalties.
Can a non-resident register a UK limited company?
There is no residency requirement to register a UK limited company. Directors and shareholders can be based anywhere in the world. Companies House requires a UK registered office address, but not a UK director or UK shareholder. In practice, non-residents face two main hurdles. First, a UK registered office address is legally required and must be a physical UK address, not a PO box. Second, opening a UK business bank account as a non-resident is the most common friction point, as most high street banks require an in-person appointment or UK credit history. Challenger banks such as Wise, Tide, and Airwallex have made this significantly easier for non-resident directors. Once incorporated, your company is subject to UK Corporation Tax on profits generated through UK activity, regardless of where its directors are based. You will need to register for Corporation Tax with HMRC within three months of starting to trade. YCF’s formation packages include a UK registered office address, which meets Companies House requirements and keeps your personal address off the public register. Formation can be completed entirely online, without visiting the UK.
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