Start a Business in the UK — The No-Fluff Guide
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 |
A common default: Starling Business. It has no monthly fee on its standard business accounts, instant payment notifications and direct feeds into the main accounting software, and it holds a UK banking licence, so deposits are FSCS-protected up to £120,000.
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 |
A common default: FreeAgent for sole traders and micro-businesses. It handles Self Assessment, VAT returns, CIS and payroll, is built for the UK market, and is recognised by HMRC for Making Tax Digital. If you bank with NatWest, RBS or Mettle, it's included 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
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.