How to Start a Business – UK Guide for Sole Traders & Ltd Co

Starting a business in the UK can be straightforward once you understand the legal steps, costs, and practical requirements. Whether you operate as a sole trader or a limited company, the first decisions shape everything that follows.

The UK offers two main business structures: sole trader and limited company. For many, the choice depends on budget, liability, and future plans. Sole trader registration with HMRC is free, while a limited company requires a fee to Companies House. Foreigners can also register a UK company, but need to address immigration status, a UK address, and banking.

This guide covers the essential questions: what it costs, how to start with little or no money, how to run a business from home, and what non-UK residents must know. All information is based on official sources and current 2025 rules.

How to Start a Business in the UK

The first step is to choose your business structure. Below is an overview of the two main options.

Key insights for starting a business in the UK

• You can trade immediately without registration if your self-employment income is under £1,000 (Trading Allowance).
• Registering as a sole trader with HMRC is free and done online.
• Limited company registration costs £12 via Companies House.
• Starting a business from home usually does not require planning permission unless you make structural changes or have high visitor traffic.
• Non-UK residents can set up a UK limited company, but must have a UK registered address.
• A business bank account is required for limited companies; sole traders can use personal accounts but HMRC recommends separation.
• No-money startup options include service-based businesses, freelancing, and digital products.

Key facts: Starting a business in the UK

How Much Does It Cost to Start a Business in the UK?

Official registration fees

The most reliable official fees are: sole trader HMRC registration is free. Limited company online incorporation through Companies House costs £12 for the standard service. Some sources mention £50 or £71 by post, depending on the service and method. GOV.UK states you can start trading as a sole trader without registering if earnings are below £1,000.

Starting with no money

Sole trader is the cheapest route because you pay no registration fee. A limited company can still be started on a small budget, but you should expect costs for incorporation, a registered office address, bank account setup, and accounting or compliance support. Remitly estimates that first-year costs for an immigrant entrepreneur can average about £22,750 when legal, admin, accountancy, HR, and immigration costs are included.

Additional costs to consider

• Virtual/registered office address: roughly £30–275/year depending on location and provider.
• Confirmation Statement: £34 online, £62 by post.
• Business insurance: varies by industry; some professions legally require it.
• Accounting software or accountant fees: optional but recommended.

How to Start a Business from Home in the UK

Do you need permission?

Starting a business from your home usually does not require planning permission. However, if you make structural changes, install a sign, or have customers visiting regularly, you may need to check with your local council. Also inform your mortgage lender or landlord, as some tenancy agreements restrict business use.

Tax implications

You can claim home office expenses using HMRC’s simplified expenses method (£6 per week) or by calculating actual costs (e.g., a proportion of rent, utilities, internet). Keep detailed records. If you use part of your home exclusively for business, you may also be able to claim a portion of capital gains relief when you sell the property, but rules can be complex.

Starting a Business in the UK as a Foreigner

Can non-residents register a UK company?

Yes. Non-UK residents can form a private limited company in the UK. The process requires a UK registered office address (which can be a virtual address service), director and shareholder details, and compliance with Companies House and HMRC requirements. You do not need to live in the UK to own a UK company, but you will need a business bank account, which some providers open remotely.

Visa and immigration

If you plan to work or actively run the business from within the UK, you need the appropriate visa. Options include the Innovator Visa, Start-up Visa, or Global Talent Visa, each with different investment and eligibility criteria. Without a work visa, you cannot legally work as a director or employee in the UK. Owning a company does not automatically grant the right to live or work in the country.

How Long Does It Take to Start a Business in the UK?

The timeline from idea to trading depends on the structure and your preparedness. Below is a typical sequence.

1. Week 1–2: Validate your business idea, choose a structure (sole trader or limited company), and check name availability.
2. Week 3: Register as a sole trader (free, online, UTR within 10 days) or incorporate a limited company (£12, often processed within 24 hours).
3. Week 3–4: Open a business bank account (if needed) and register for VAT if turnover is above £90,000.
4. Week 4: Set up accounting records, get business insurance if required, and prepare your trading space.
5. Month 1–3: Start trading, keep income and expense records. Register for Self Assessment by October 5 after the tax year you start.

For a limited company, you must register before trading. For a sole trader, you can start immediately and register later if income exceeds £1,000.

What Is Certain and What Remains Uncertain When Starting a Business?

Sole Trader vs Limited Company: Which Structure Should You Choose?

Each scenario favours a different structure. For a low-cost home business, a sole trader is simpler and avoids registration fees. For foreigners, a limited company may be easier because it provides a clear legal entity separate from personal immigration status. Here is a closer look at the differences. If you have no money, start as a sole trader to test the idea without upfront costs. Later, if profits grow, you can move to a limited company for liability protection and credibility.

Funding options include government start-up loans, grants, and crowdfunding. Many lenders require a business plan and separate finances. An accountant can help with tax planning and compliance, especially as Making Tax Digital for VAT becomes mandatory for VAT-registered businesses.

Recent changes to note: the VAT threshold is £90,000 for 2025/26. Companies must file a confirmation statement annually (online £34, by post £62). Even a dormant company must file to avoid penalties.

Where Can I Find Official Guidance and Sources?

The following official sources provide authoritative guidance.

“You can start trading straight away without registering. However, you must register for Self Assessment as a sole trader if you earn more than £1,000 in a tax year.”

– GOV.UK – Set up a business

“Government-backed advice and guidance to help you develop your business idea and identity, understand finances and funding and build your business.”

– Business.gov.uk – Starting a business

“From choosing a name, registering as self-employed and applying for startup funding, there’s lots to consider before starting a business.”

– Prospects – How to start a business

For direct registration, use Register for Self Assessment (HMRC) and Companies House – Limited company formation. Additional reading includes Anna Money’s guide for foreigners and Instarem’s UK business registration overview.

What’s Next After You Start Your Business?

Once you have registered and begun trading, focus on keeping accurate records, filing your tax return on time, and reviewing whether your structure still suits your needs. Many successful businesses start as sole traders and later incorporate. Use the Set up a business tool to explore your idea further, and consider professional advice if your circumstances are complex.

Frequently Asked Questions