Quick Answer
Starting a UK business in 2026 means choosing a structure, registering with Companies House or HMRC, opening a business bank account, and getting core compliance sorted, identity verification, tax registration, and record keeping, before you begin trading properly. Sole traders register with HMRC for Self Assessment, while limited companies register with Companies House first, then with HMRC for Corporation Tax.
Step 1: Validate the Idea First
Before any paperwork, research whether there is genuine demand for what you plan to sell and who your realistic target market is. Skipping this step is one of the most common reasons new businesses struggle in their first year, regardless of how solid the administrative setup turns out to be.
Step 2: Choose Your Business Structure
| Structure | Key Features |
|---|---|
| Sole Trader | Simplest to set up, but you are personally liable for business debts |
| Private Limited Company (Ltd) | Separate legal entity, limited liability, more administrative requirements |
| Partnership | Shared ownership and liability between two or more people |
Step 3: Register With Companies House or HMRC
A sole trader registers directly with HMRC for Self Assessment once trading income passes the £1,000 trading allowance, with an October 5th deadline in the business’s second tax year to avoid a late-registration penalty. A limited company registers with Companies House first, providing a Memorandum and Articles of Association along with details of initial shareholdings, typically costing around £50 for a standard online application, before registering separately with HMRC for Corporation Tax.
New for 2026: Director Identity Verification
As of November 2026, all new and existing company directors and persons with significant control must complete an identity verification process with Companies House. You cannot formally act as a director until this is completed, making it an essential early step for anyone forming a limited company this year.
Step 4: Choose and Protect Your Business Name
A name can be free to register at Companies House and still cause problems later if someone else already holds the trademark, or if customers confuse you with an established brand. Checking trademark availability alongside company name availability avoids a costly rebrand further down the line.
Step 5: Set Up Your Registered Office Address
This is the official address where HMRC and Companies House send legal correspondence. If you work from home and want to keep your residential address off the public record, a professional registered office address service is worth considering from the outset.
Step 6: Open a Business Bank Account
For limited companies, a separate business bank account is a legal necessity. For sole traders it is not legally required but is strongly recommended, since mixing personal and business funds is one of the fastest ways to trigger an HMRC enquiry and makes bookkeeping considerably harder.
Step 7: Register for the Right Taxes
- Corporation Tax registration is required within three months of a limited company starting to trade
- VAT registration becomes mandatory once taxable turnover exceeds £90,000, though voluntary registration is available below this threshold
- PAYE registration is needed if you plan to employ staff
Step 8: Set Up Bookkeeping and Invoicing
Adopting cloud-based accounting software from the start makes ongoing compliance considerably easier, particularly with Making Tax Digital for Income Tax now applying to more businesses. Good record keeping from day one avoids a stressful scramble later at tax filing time.
Step 9: Arrange Business Insurance
The specific cover needed depends on your business type, but public liability, professional indemnity, and employer’s liability insurance, the latter a legal requirement once you employ staff, are the most commonly needed policies for new UK businesses.
Step 10: Build Your Online Presence
A professional website and consistent branding help build trust with customers from the outset. Deciding on a platform, such as WordPress or a hosted website builder, and setting up basic search visibility early gives your business a head start rather than treating this as an afterthought.
Ongoing Compliance Once You’re Trading
- File annual accounts and a confirmation statement with Companies House if you run a limited company
- Submit Self Assessment returns on time if you are a sole trader
- Keep accurate financial records throughout the year, not just at filing deadlines
- Review your business structure and tax position periodically as the business grows
Frequently Asked Questions
Do I need to register as a limited company to start a UK business?
No, many people start as a sole trader, which is simpler to set up, though it carries personal liability for business debts unlike a limited company.
What is the new director identity verification rule?
From November 2026, all company directors and persons with significant control must complete identity verification with Companies House before they can formally act as a director.
When do I need to register for VAT?
Once your taxable turnover exceeds £90,000 in a 12 month period, though you can register voluntarily below this threshold.
How much does it cost to register a limited company?
Online incorporation through Companies House typically costs around £50, with postal applications costing more.
Do sole traders need a separate business bank account?
It is not a legal requirement, but it is strongly recommended to keep bookkeeping simple and avoid complications with HMRC.