How to Set Up a Limited Company in the UK

Last updated: 6 November 2026 · Current UK tax year: 2026/27

Setting up a limited company in the UK is one of the most significant financial decisions you will make as a business owner. This guide walks you through every step, from choosing a company name to understanding your ongoing tax obligations, so you can start trading with confidence. It is aimed at anyone thinking about incorporating for the first time, whether you are a sole trader ready to grow, a contractor, a healthcare professional going independent, or an entrepreneur launching a new venture.

• Why choose a limited company?
• What to decide before you register
• How to register your limited company
• What to do after incorporation
• Your ongoing tax obligations
• How to pay yourself as a director
• Record keeping and accounts
• Common mistakes to avoid
• Frequently asked questions

Why choose a limited company?

A limited company is a separate legal entity from you as an individual. That separation brings several practical advantages over operating as a sole trader.

Limited liability

Your personal assets are protected if the business runs into debt, provided you have acted lawfully. As a sole trader, your personal savings, home and possessions are all at risk. With a limited company, your liability is limited to the amount you have invested in the company.

Tax efficiency

In 2026/27, Corporation Tax on profits under £50,000 is 19%, rising to 25% on profits over £250,000 with marginal relief between those thresholds. By contrast, a sole trader pays income tax at 20%, 40% or 45% on the same profits, plus Class 4 National Insurance. For many business owners, the Corporation Tax rate is lower than the income tax they would otherwise pay, particularly once profits exceed £30,000 to £35,000 per year.

Credibility and growth

Many larger clients, public sector bodies and recruitment agencies will only contract with limited companies. Incorporation can open doors that remain closed to sole traders.

Investment and ownership

A limited company can issue shares, which makes it far simpler to bring in business partners, attract investment or sell a stake in the future.

What to decide before you register

Rushing into registration without thinking through the basics leads to costly changes later. Work through each of these decisions first.

Company name

Your company name must be unique. You can search the Companies House register at gov.uk to check availability. The name must end with “Limited” or “Ltd”. Avoid names that are too similar to existing registered companies, and avoid names that imply a connection to government or use sensitive words without prior approval.

Registered office address

Every limited company must have a registered office address in the UK. This address appears on the public Companies House register and is where HMRC and Companies House send official correspondence. You can use your home address, a business address or a professional registered office address provided by your accountant.

Directors and shareholders

You need at least one director, who must be a natural person aged 16 or over. Directors run the company day to day and are legally responsible for filing accounts and returns on time. Shareholders own the company through shares. As a small business owner, you will often be both the sole director and the sole shareholder.

Share structure

Decide how many shares to issue and at what nominal value. For a simple one-person company, 100 ordinary shares at £1 each is a common starting point. If you plan to split ownership with a business partner or spouse, think carefully about your share structure before you register, as it affects how dividends are paid and taxed.

Standard Industrial Classification (SIC) code

You will need to select a SIC code that describes your business activity. Choose the closest match to what you do. You can select more than one if your business spans multiple sectors.

How to register your limited company

Registering a limited company in the UK is straightforward. The standard method is to register directly through Companies House.

Register online through Companies House

Go to the Companies House web incorporation service at gov.uk. You will need to submit:

• Your proposed company name
• Your registered office address
• Details of all directors (name, date of birth, nationality, address)
• Details of all shareholders and the shares they will hold
• Your memorandum and articles of association (Companies House provides a standard template)
• Your SIC code
• The £50 registration fee (payable online)

Most applications are processed within 24 hours. Once approved, you receive a Certificate of Incorporation, your company registration number and the date of incorporation. Keep these documents safe.

Use a formation agent or accountant

NDCA offers a company formation service that handles the registration on your behalf. This is a sensible option if you want the structure set up correctly from day one, with the right share classes and articles in place, without the risk of making errors on the application.

What to do after incorporation

Once your company is registered, several things need to happen promptly.

Register with HMRC for Corporation Tax

You must tell HMRC that your company exists and is liable for Corporation Tax within three months of starting to trade. You do this through your HMRC online account using your Unique Taxpayer Reference (UTR), which HMRC sends to your registered office shortly after incorporation. Missing this deadline can result in penalties.

Open a business bank account

A limited company is a separate legal entity, so you must keep company money completely separate from your personal finances. Open a dedicated business bank account as soon as possible. Many banks and fintech providers offer accounts for limited companies, some with no monthly fee.

Register for VAT if required

If your taxable turnover will exceed £90,000 in any rolling 12-month period (the 2026/27 threshold), you must register for VAT. You can also register voluntarily below this threshold, which allows you to reclaim VAT on business purchases. NDCA handles VAT returns for limited companies and can advise on whether voluntary registration makes sense for your situation.

Set up payroll if you plan to pay a salary

If you are going to pay yourself or any employees a salary, you need to register as an employer with HMRC and operate PAYE. NDCA provides an outsourced payroll service that takes this off your plate entirely.

Your ongoing tax obligations

Running a limited company comes with a set of annual and ongoing filing obligations. Missing deadlines triggers automatic penalties.

Corporation Tax return

Your company must file a Corporation Tax return (CT600) with HMRC each year, within 12 months of the end of your accounting period. The tax itself must be paid within nine months and one day of the period end. NDCA prepares Corporation Tax returns for limited companies and ensures you claim every allowable deduction.

Annual accounts

You must file annual statutory accounts with Companies House each year, usually within nine months of your accounting year end. These accounts become publicly visible on the Companies House register. NDCA prepares annual accounts that meet all statutory requirements.

Confirmation statement

Every limited company must file a confirmation statement with Companies House at least once a year. This confirms that the information Companies House holds about your company is up to date. The fee is £34 when filed online.

Personal Self Assessment

As a director, you must file a personal Self Assessment tax return each year, even if all your income was paid through PAYE. This captures any dividends you have drawn, any benefits in kind, and any other income outside of salary.

VAT returns

If you are VAT registered, you must file VAT returns, typically quarterly, through HMRC’s Making Tax Digital platform. Under Making Tax Digital, all VAT-registered businesses must keep digital records and submit returns using compatible software.

How to pay yourself as a director

Most small limited company directors pay themselves using a combination of a low salary and dividends. This is legitimate tax planning, not avoidance.

Salary

In 2026/27, many directors set their salary at the National Insurance lower earnings limit or the employer NI threshold of £5,000. Some set it at the personal allowance of £12,570 to use that allowance in full. The right level depends on whether you have other income, whether the company can claim the Employment Allowance (£10,500 in 2026/27), and your overall profit level. Take advice before setting your salary.

Dividends

Dividends are paid from post-tax profits and are not subject to National Insurance. In 2026/27, the dividend allowance is £500. Above that, dividends are taxed at 10.75% (basic rate), 35.75% (higher rate) or 39.35% (additional rate).

Pension contributions

Your company can make employer pension contributions directly into your pension. These are a deductible business expense, reducing the company’s Corporation Tax bill, and they do not count as income for income tax purposes. The annual pension allowance is £60,000 in 2026/27, though your personal circumstances may affect how much you can contribute efficiently.

Record keeping and accounts

Limited companies must keep accurate financial records. HMRC can request records going back six years, and Companies House requires annual accounts based on those records.

Good record keeping means logging every invoice, receipt and bank transaction in a timely way. Many business owners find this time-consuming and error-prone when they try to manage it themselves. NDCA’s bookkeeping service keeps your records up to date throughout the year, so there are no surprises at year end. If your records have fallen behind, the bookkeeping catch-up service gets everything back on track quickly.

As your company grows, management accounts give you a monthly or quarterly picture of your financial performance, which is essential for making good business decisions and securing finance. NDCA also offers cash flow forecasting to help you plan ahead with confidence.

Common mistakes to avoid

Many new limited company directors make avoidable errors in the early months. Here are the most common ones.

• Missing the Corporation Tax registration deadline. You have three months from starting to trade to tell HMRC your company exists. Miss this and you risk penalties.
• Not keeping personal and company finances separate. Mixing personal and business money creates accounting chaos and raises questions from HMRC.
• Drawing money without understanding the tax consequences. Taking large amounts from the company without understanding whether they are salary, dividends or loans leads to unexpected tax bills.
• Forgetting the confirmation statement. This annual filing is easy to overlook, but missing it results in a fine and can eventually lead to your company being struck off.
• Ignoring VAT registration requirements. If your turnover crosses £90,000, you must register for VAT. Failing to register on time means you owe the VAT from the date you should have registered, even if you did not charge it to customers.
• Not taking accounting advice before you incorporate. The structure you choose on day one, including share classes, director arrangements and registered office, affects your tax position for years to come.

If you have already incorporated and are unhappy with your current accountant’s level of service, switching accountants is simpler than most people think. NDCA manages the entire transfer process and HMRC normally replies to agent authorisation requests promptly.

Frequently asked questions

How much does it cost to set up a limited company in the UK?

Registering directly through Companies House costs £50 when done online. If you use a formation agent or accountant, there may be an additional service fee. The process itself is straightforward, but getting the structure right from the start is worth the extra cost of professional advice.

How long does it take to register a limited company?

Online applications submitted directly to Companies House are typically processed within 24 hours. Postal applications take longer, usually eight to ten working days. Once approved, you receive your Certificate of Incorporation and can begin trading immediately.

Do I need a business bank account for a limited company?

Yes. A limited company is a separate legal entity, so its finances must be kept entirely separate from your personal money. Using a personal account for company transactions causes accounting problems and is not compliant with company law.

Do I need an accountant to run a limited company?

You are not legally required to appoint an accountant, but the obligations that come with running a limited company, including Corporation Tax returns, annual accounts, payroll, VAT returns and Self Assessment, are time-consuming and carry penalties for errors or late filing. Most limited company directors find that the cost of an accountant is quickly outweighed by the tax savings and time saved. NDCA offers fixed monthly fees with a named accountant, so you always know who to call. NDCA normally replies the same day.

Can I set up a limited company while employed?

Yes. There is no legal restriction on being employed and running a limited company at the same time. Check your employment contract to make sure there is no clause restricting you from certain business activities, then proceed as normal. You will need to file a Self Assessment tax return each year to report your company income alongside your employment income.

What is the difference between a limited company and a sole trader?

A sole trader and their business are the same legal entity. The owner is personally liable for all debts and pays income tax on all profits. A limited company is a separate legal entity, offering limited liability, potential Corporation Tax savings and a more formal structure for growth. The right choice depends on your profit level, risk appetite and growth plans. NDCA can help you decide which structure suits your situation before you make any changes.