Start a Business in the UK — The No-Fluff Guide
You've got an idea. Maybe a plan. Possibly a spreadsheet. What you don't have is a clear picture of the actual steps between "I want to start a business" and "I have a business."
Here they are. In order. With the boring bits explained properly.
Step 1: Choose Your Structure
| Structure | Best For | Liability | Tax | Admin |
|---|---|---|---|---|
| Sole Trader | Simple businesses, low risk, starting out | Unlimited (personal assets at risk) | Income Tax + NI on profits | Minimal — Self Assessment once a year |
| Limited Company (Ltd) | Higher income, risk protection, credibility | Limited to company assets | Corporation Tax + personal tax on salary/dividends | More admin — annual accounts, confirmation statement, payroll |
| Partnership | Two or more people, shared venture | Unlimited (each partner liable) | Each partner pays Income Tax on their share | Partnership tax return + individual returns |
| LLP | Professional services, liability protection | Limited to investment | Each partner taxed individually | Companies House registration + individual returns |
For most people starting out: Sole trader. It's free, it's fast, and you can convert to a limited company later if needed. If you're expecting to earn over £50,000/year from the start, or you need liability protection, go straight to Ltd.
Step 2: Register
Sole Trader
- Go to gov.uk → Register for Self Assessment
- Provide your National Insurance number
- Choose your business start date
- Done. HMRC will send you a Unique Taxpayer Reference (UTR) within 10 days.
Cost: Free
Limited Company
- Go to Companies House → Incorporate online
- Choose a company name (check availability first)
- Provide a registered office address (can be your home)
- Appoint at least one director (that's you)
- Define share structure (1 share at £1 is fine to start)
- Choose a SIC code (Standard Industrial Classification — describes your business activity)
- Submit and pay
Cost: £12 online (£30 by post, £30 same-day)
Timeline: Usually approved within 24 hours
After incorporation:
- Register for Corporation Tax with HMRC (within 3 months)
- Set up PAYE if you'll pay yourself a salary
- Register for VAT if turnover will exceed £90,000
Step 3: Open a Business Bank Account
Do not mix personal and business finances. Ever. Open a dedicated business account on day one.
| Bank | Monthly Fee | Best For |
|---|---|---|
| Starling Business | Free (sole trader) / Free (Ltd, basic) | Best overall — clean app, no fees on UK transfers |
| Tide | Free (basic) | Invoice management built in, good for sole traders |
| Monzo Business | Free (Lite) / £7/mo (Pro) | Familiar interface, tax pot feature |
| HSBC Kinetic | Free (18 months) | Traditional bank backing with modern app |
| Revolut Business | Free (basic) | Multi-currency, good for international payments |
Our pick: Starling Business. Clean app, no monthly fees, instant notifications, excellent integration with accounting software.
Step 4: Set Up Accounting
You need to track income and expenses from day one. Not "when things get serious." Day one.
Options
| Software | Monthly Cost | Best For |
|---|---|---|
| FreeAgent | £14.50/mo (free with NatWest/RBS business account) | UK sole traders and small Ltd companies — the best UK-specific accounting software |
| Xero | From £15/mo | Growing businesses, multi-currency, extensive app ecosystem |
| QuickBooks | From £12/mo | Simple invoicing and expenses, decent reports |
| Spreadsheet | Free | If your bookkeeping needs are truly minimal |
Our pick: FreeAgent for sole traders and micro-businesses. It handles Self Assessment, VAT returns, CIS, and payroll — all built for the UK market. If you bank with NatWest or RBS, it's free.
Making Tax Digital (MTD)
As of April 2026, all self-employed individuals and landlords with income over £50,000 must keep digital tax records and submit quarterly updates to HMRC. This threshold drops to £30,000 from April 2027. Use MTD-compatible software.
Step 5: Get Insured
Essential Insurance
| Type | What It Covers | Typical Cost |
|---|---|---|
| Public Liability | Injury or damage to third parties or their property | £50–£200/year |
| Professional Indemnity | Claims of negligence, bad advice, or errors in your work | £100–£300/year |
| Employers' Liability | Legal requirement if you have employees | £80–£200/year |
| Business Equipment | Laptops, tools, stock | Varies |
Providers: Hiscox, Simply Business, AXA, Superscript. Get quotes from at least three.
If you're a sole trader working from home with no employees and no client-facing premises, Public Liability and Professional Indemnity are usually sufficient.
Step 6: Sort Your Address and Communications
- Registered office: Your home address is fine for a Ltd company, but it goes on public record at Companies House. If you'd prefer privacy, use a registered office service (£50–£100/year).
- Business address: Virtual office services provide a professional address for post and correspondence (from £15/month).
- Business email: Use a domain-based email ([email protected]). Gmail is free but doesn't look professional. Google Workspace is £4.60/month per user.
- Website: Even a single-page site adds credibility. Carrd (£19/year), Squarespace (from £11/month), or WordPress (free with cheap hosting).
Step 7: Understand Your Tax Obligations
Key Dates
| Date | What |
|---|---|
| 5 April | Tax year ends |
| 31 July | Second payment on account due (if applicable) |
| 5 October | Deadline to register for Self Assessment (if newly self-employed) |
| 31 January | Self Assessment filing deadline + first payment on account |
| 31 January | Balancing payment for previous tax year |
What You Can Deduct
Legitimate business expenses include:
- Office costs (stationery, phone, internet — proportion if working from home)
- Travel (mileage at 45p/mile for the first 10,000 miles, 25p after)
- Professional services (accountant, solicitor)
- Marketing and advertising
- Software and subscriptions
- Training directly related to your business
- Stock and materials
Simplified Home Office Deduction
If you work from home, you can claim a flat rate instead of calculating actual costs:
| Hours worked from home per month | Flat rate |
|---|---|
| 25–50 hours | £10/month |
| 51–100 hours | £18/month |
| 101+ hours | £26/month |
The First 90 Days — Checklist
- [ ] Choose structure (sole trader or Ltd)
- [ ] Register with HMRC and/or Companies House
- [ ] Open a business bank account
- [ ] Set up accounting software
- [ ] Get appropriate insurance
- [ ] Set up a professional email
- [ ] Create a basic website or landing page
- [ ] Define your pricing
- [ ] Send your first invoice
- [ ] Set aside 25–30% of income for tax
Common First-Year Mistakes
- Not separating finances. Open a business account. Today.
- Ignoring tax until January. Set aside money every month. File early.
- Underpricing. You're a business, not a charity. Charge what you're worth.
- No written contracts. Even for small projects. Especially for friends.
- Trying to do everything yourself. An accountant costs £500–£1,500/year. They save you more than that in tax efficiency and time.
Starting a business is easier than most people think. Running one well is harder than most people expect. This guide is for informational purposes only — consult a qualified accountant and solicitor for advice specific to your situation.