Forming a UK limited company takes about 24 hours and costs £50 online at Companies House. You need a company name, a UK registered office address, at least one director, at least one shareholder, a share structure and a SIC code. The harder part is everything that comes afterwards.
This guide covers the mechanics: registering, telling HMRC, setting up payroll and a bank account, and the filings you are then locked into every year. It does not try to talk you into it.
First, check that a company is the right structure
Incorporating does not automatically cut your tax bill, and in 2026/27 it usually does not cut it at all. Employer National Insurance rose to 15% on a £5,000 secondary threshold in April 2025, the dividend ordinary and upper rates each rose two percentage points in April 2026, and a single-director company generally cannot claim the £10,500 Employment Allowance.
Put together, a one-person company that pays out all its profit is usually a little worse off than the same person trading as a sole trader, before the extra accountancy fees. Our limited company vs sole trader comparison works through the arithmetic at £40,000 and £80,000 of profit.
The reasons that do still stack up are limited liability, clients or agencies that will only engage a company, wanting to bring in shareholders or investment, being able to retain profit in the business rather than being taxed on all of it, and having something you can eventually sell. If one of those applies to you, read on.
Step 1: Pick a name
The name must be unique and not "too similar" to an existing registered company, and it must end in "Limited" or "Ltd". Sensitive words such as "Royal", "British", "Bank" and "Authority" need permission.
Check availability for free on the Companies House register before you get attached to anything. It is also worth a quick trade mark search and a domain check at the same time, because a registered company name gives you no rights over either.
Step 2: Register with Companies House
Do it online at gov.uk/set-up-limited-company. It costs £50 — the fee rose from £12 on 1 May 2024, so ignore any guide still quoting the old figure — and registration is usually complete within 24 hours, often a few hours. You will need:
- A UK registered office address. Since March 2024 it must be an "appropriate address" where post can be delivered and acknowledged, so a PO box will not do
- At least one director, who must be 16 or over
- At least one shareholder, which can be the same person
- Share structure details — most small companies simply issue one ordinary £1 share
- A SIC code describing your business activity
- An email address for the company, which Companies House now requires
The model articles of association work fine for the vast majority of small companies. Do not overthink this part. You will also be asked to verify your identity as a director and person with significant control, which is now a requirement under the Economic Crime and Corporate Transparency Act.
Step 3: Register for Corporation Tax
This is separate from Companies House registration. You must register with HMRC within 3 months of starting to trade. Do it online and HMRC issues a Unique Taxpayer Reference for the company.
Corporation tax is 19% on profits up to £50,000 and 25% above £250,000, with marginal relief in between producing an effective rate somewhere between the two.
Step 4: Set up PAYE
If you are going to pay yourself a salary, register as an employer with HMRC. You can do this up to two months before your first payday. After that you run payroll, submit an RTI report every time you pay yourself, and pay any PAYE and NI over by the 22nd of the following month.
On the salary figure itself, £12,570 (the personal allowance) is still the common starting point for a single director, but the £5,000 secondary threshold means it now costs the company £1,135.50 in employer NI. A £5,000 salary avoids that entirely. Ask your accountant to model both against your actual profit rather than defaulting to a number from an old blog post.
Step 5: Open a business bank account
A limited company must have its own account. Company money is not your money, and mixing the two creates a director's loan account and a lot of avoidable mess.
Starling, Tide and Mettle offer free or low-cost business accounts with quick online setup. High street banks work too but expect a longer application. You will need your company registration number and photo ID.
Step 6: Sort insurance and VAT
Employers' liability insurance is a legal requirement once you have staff, though a company with a single director who owns most of the shares is normally exempt. Professional indemnity cover is often demanded in contracts even when it is not legally required.
VAT registration is compulsory once your taxable turnover passes £90,000 in any rolling 12 months. You can register voluntarily below that, which sometimes makes sense if your customers are VAT-registered businesses and you have input tax to reclaim.
Your ongoing obligations
- Annual accounts: filed with Companies House within 9 months of your year end. Small and micro-entity companies can file simplified accounts
- Corporation Tax return (CT600): filed with HMRC within 12 months of your year end, but the tax itself is due within 9 months and 1 day
- Confirmation statement: once a year, confirming your company details are correct. £34 online
- Payroll: RTI submissions every pay run, plus a year-end process
- VAT returns: quarterly, if you are registered, under Making Tax Digital
- Self Assessment: you still file personally for your salary and dividends
Late filing is penalised automatically and the penalties escalate. Missing your accounts deadline by more than six months costs £1,500 on top of any tax interest, and persistent failure can get the company struck off.
What it costs to run
- Accountant: £800 to £2,500 a year for accounts, the CT600 and payroll
- Companies House confirmation statement: £34 a year
- Registered office service, if you would rather not use your home address: £50 to £200 a year
- Business bank account: free to around £15 a month
- Professional indemnity insurance: £200 to £600 a year depending on trade
Budget on the company costing £600 to £1,500 a year more than a sole trader return would. That is the number to weigh any tax saving against, and at most profit levels in 2026/27 there is no tax saving to weigh it against.
One thing people underestimate: publicity
Your registered office, your name, your month and year of birth, your shareholding and your accounts are all on the public register, free for anyone to look at. Competitors and clients do look. If your home address would otherwise appear, a registered office service is worth the £50 to £200 a year.
Is everyone still doing this?
Fewer people than were. Companies House recorded 801,864 new incorporations in the year to March 2025, down 10.0% on the year before, with 5,427,787 companies on the register at 31 March 2025. The fee rise and tighter identity checks are part of that, but so is the fact that the tax case has weakened.
None of which means you should not incorporate. It means you should do it for a reason you can name.
Before you register, run your own numbers with our limited company calculator to see what salary and dividend split works at 2026/27 rates, and read the sole trader comparison if you have not settled the structure question yet.
This article is general information for the 2026/27 UK tax year, not personalised tax or legal advice, and figures may change; parts were drafted with AI assistance and reviewed for accuracy. Check GOV.UK or a qualified accountant before acting.