Starting a business in the UK is your first step to gaining financial independence and/or starting your entrepreneurial journey. Whether you are launching a small side hustle in one of the most dynamic business markets in the world or planning to build a full-scale company, the UK is an ideal choice. However, to start your business here also means fulfilling some legal obligations. Among them, registering your business is the most important one.
Here’s a brief guide on how to register a business in the UK.
How to Register a Business?
There are many ways of registering your business in the UK. However, the core steps remain the same, prominently including;
Choose a business structure
The first step is to choose a business structure. For example, sole trader, partnership, limited company, etc., this helps you better understand your business liabilities and liabilities in the UK market, so you can proceed with the registration process accordingly.
Select a unique name
Pick a unique name for your business and make sure this name reflects the core services/products of your business. Get a logo designed. However, make sure that the name you are picking for your business is not already registered in the UK business market.
Register with HMRC (HM Revenue & Customs) or Companies House
As a sole trader in the UK, you need business registration with HMRC, while limited companies must register with Companies House.
Set up finances
It’s an intelligent decision to have a separate business account for your business. So, open up a separate business account under its registered name for official transactions.
Understand tax responsibilities
Register your business for taxes and understand your tax responsibilities. Submit your tax returns and/or register for VAT if your turnover exceeds £90,000. It’s better to hire a tax specialist in this regard for a professional opinion.
Get essential permits/licenses
Certain businesses require additional permits and licenses. For example, food, healthcare, transport, etc., so understand the different licenses required for your business type and obtain one.
Buy insurance
Consider buying business insurance for public liability or professional indemnity to avoid any sort of financial risks for your business.
Sole Trader Registration
A sole trader is the most popular, simplest and widely preferred business registration type in the UK. It’s an ideal choice if you are a freelancer, consultant, or small business owner who requires full control. As a sole trader, you will run your business independently. All of your business profits will solely be yours, and you will also be responsible for all of the debts.
To register as a sole trader;
- Register with HMRC for self-assessment. You can do it online as the process only takes 10-15 minutes.
- Once your registration with HMRC is successful, the department will send you a Unique Taxpayer Reference (UTR) by post. This number will be useful when filing your tax returns.
- Keep accurate Financial Records with all of your income and expenses to avoid any confusion when doing a self-assessment.
- File your Self-Assessment Tax Return in time by 31 January.
As a sole trader, you enjoy a quick and easy setup with full control over your business. It has lower administrative costs and minimal paperwork. However, some of the disadvantages include huge personal liability, harder to secure funding and less credibility in the market (as compared to companies).
Limited Company Registration
Establishing a limited company is more complex than sole trader ownership but offers several advantages in the long run, especially for businesses that are scaling over time. This is a separate legal entity from its owners (shareholders); therefore, your personal assets are immune to business debts.
To register a limited company in the UK, you must;
- Choose a unique, never-used-before company name that remains in compliance with Companies House rules
- Appoint directors (at least one) and other shareholders. Without it, legal compliance of your business is not possible.
- Prepare key documents Memorandum of Association and Articles of Association, outlining how your limited company will operate.
- Register your company with Companies House by fulfilling all of the obligations. You can do it by post, online or through an agent, and it takes as little as 24 hours.
- After successful business registration, also register with HMRC for Corporation Taxation. This should be done within three months of starting your business operations and no later than that.
- Open a separate bank account for your business and use it for your official transactions.
- File annual accounts and tax returns, submit a Confirmation Statement and maintain company records.
Starting a limited company offers you liability protection for your personal assets, attracts investors, and holds a credible reputation for your business. However, on the other side, it also brings in more operational costs, extensive administrative work and higher accounting costs.
Costs Involved
Understanding the costs of registering your business in the UK is also essential for a smooth operation.
Sole Trader
Starting your sole trader journey in the UK comes with negligible fees. Your registration with HMRC and name registration is free of cost. However, you need £10–£30 per month for accounting software; £50–£200 per year for business insurance and varied costs for seeking professional advice.
Limited Company
A limited company comes with higher initial and ongoing costs. Registration with Companies House can cost you £12–£50, depending on the method used. You will need £300–£1,500 per year for Accounting services and £20–£100 per year for a registered office address. Businesses in the UK incur costs that vary, while the Confirmation Statement is £13 annually, and corporate taxation is between 19%–25% depending on profits.
For more accurate and updated information, it’s better to consult with a professional in the UK.