How to register a business in the UK: An eight-step guide for startup founders

Registering a business in the UK can seem overwhelming, especially with all the legal steps involved. To help ease the burden, we’ve created this eight step guide to steer you through the process.

Whether you’re registration-ready or just gathering information for the future, this guide will help you navigate each stage of setting up a business in the UK.

Step 1: Choose the right business structure

Before registering your business in the UK, you’ll need to decide an appropriate business structure. There are several business models to choose from, including Sole Trader, Partnership, Limited Company (Ltd) and Limited Liability Partnership (LLP). 

Each model is slightly different and will depend on the type of business you plan to run. Take a closer look at the business models available in the UK below:

Sole trader

A sole trader is the most common form of business. At the beginning of 2024, according to gov.uk, 56% of the UK’s private sector businesses were registered as sole traders. 

It’s a popular choice due to the simplicity, flexibility and minimal requirements. As a sole trader, you have complete control over your business, retain all profits and have simplified tax obligations. 

Partnership

Have you co-founded your business idea? A partnership business model is a simple way for two or more people to work together to own a business. 

A partnership model is essentially the same as a sole trader, except two or more people can share liability and profits. If you’re co-founding your business, this is the right option for you.

Limited company (Ltd)

Limited company is another popular structure in the UK, often chosen by founders looking for a more formalised and protected way to run their business. 

If you’re considering a limited company as your business model, you should know there’s a bit more paperwork involved – but it does offer personal liability protection and can help build credibility. 

Limited liability partnership (LLP)

A limited liability partnership (LLP) combines elements of both partnership and limited company. LLP offers the flexibility of a partnership and is taxed as such. This often makes it an ideal option for professional services. 

Step 2: Decide on a business name 

Every business needs a great, catchy name. Yours is no exception! A unique company name will help you stand out from the crowd and make your business memorable. 

Once you’ve decided on a business name, you can check its availability using the Companies House name search tool. If it’s available, consider protecting it by registering a trademark. This will ensure that your business and brand identity are protected from your competitors.

Step 3: Register with HM Revenue & Customs (HMRC)

Registering your business with HM Revenue & Customs (HMRC) is an essential step for any business in the UK. 

By registering your business, you’re ensuring compliance with tax obligations and thus keeping it legally operational. Here’s what that looks like for each business type:

Sole Trader

If you’re earning more than £1,000 from your business during a tax year, it’s time to register your business as a sole trader with HMRC.

Registering is simple, all you need to do is:

1. Head over to the HMRC website and access the Self-Assessment registration section
2. Provide your details. You’ll need to provide your National Insurance number, business name and include information on the nature of your business
3. HMRC will then issue you a Unique Taxpayer Reference (UTR), which you will use to submit annual tax returns

As a sole trader, you need to file a Self-Assessment tax return annually and pay Income Tax and National Insurance contributions based on your earnings.

Partnership

Partnerships must register with HMRC for tax purposes if they’re earning any business income. Ideally, registration should happen soon after the partnership is formed.

Here are the steps to take to register:

1. Decide on a “nominated partner” who will be responsible for submitting the partnership’s tax returns and managing records
2. Both the partnership and the individual partners must register for Self-Assessment through the HMRC website
3. HMRC will issue each partner a Unique Taxpayer Reference (UTR) and the partnership itself will receive a separate UTR

The nominated partner submits an annual partnership tax return, while each partner files a personal tax return and pays tax on their share of the profits.

Limited company (Ltd)

Register your limited company with HMRC once it is incorporated with Companies House (We talk more about this under step 4). This should be done within three months of starting to trade or earning income.

Here are the steps you need to take to register:

1. Register your company with Companies House, either online or by post. You’ll need to provide information such as the company name, registered office address, shareholder information and your directors’ details
2. Once registered with Companies House, HMRC is notified automatically. You will then receive a Unique Taxpayer Reference (UTR) from HMRC by post within a few days
3. Register for corporation tax via the HMRC website using your UTR, company name and registration number

Ltd companies must submit annual corporation tax returns, pay corporation tax on profits as well as file statutory accounts with Companies House.

Limited Liability Partnerships (LLP)

You’ll need to register with HMRC within three months of starting your business activities following your limited liability partnership (LLP) incorporation with Companies House.

Here are the steps you’ll need to take to register:

1. Set up the LLP with Companies House. You’ll need to provide details of your business name, registered address and the details of all of your partners
2. Once you’ve registered, Companies House will inform HMRC and you will receive a Unique Taxpayer Reference (UTR) code for the partnership
3. Register the LLP for corporation tax and if your business turnover exceeds the VAT threshold, you’ll need to register your LLP for that too

You will need to submit an annual partnership tax return and each partner will have to file a personal Self-Assessment return. Partners may also be responsible for personal tax based on their share of the business profits.

Step 4: Register with Companies House (Ltd and LLP)

If you’re registering as a limited company (Ltd) or a limited liability partnership (LLP), you’ll need to complete the registration process with Companies House. We touched on this in step 3, but here’s a more detailed overview.

Registering your business with Companies House is fairly straightforward. You can apply online or by post, but you will need to provide a few details and documentation. 

Here’s the information you’ll need prepared:

1. A registered office address
2. Details of the company’s director and shareholders
3. Your chosen standard industrial classifications (SIC) code to describe your business activities. You can find a handy search tool to find yours here
4. Complete the memorandum and articles of association

If you’re looking for a more detailed overview of the application process, or you’d like to submit an application, visit Companies House. 

Step 5: Apply for necessary business licences and permits 

After registering your business, the next critical step is to ensure you have the required licences and permits to operate legally within the UK. The type of licence or permit you need will depend on your business industry and location.

For example, if you’re in the food industry, you’ll need a food hygiene licence, or if you run a construction company, you may require health and safety certifications. Check the government’s License Finder tool to see which ones apply to your business.

Not obtaining the right licences can lead to fines or even forced closure. That’s why it’s essential to research and apply for the necessary licences and permits before starting your operations.

Step 6: Set up a business bank account in the UK

To efficiently manage your finances, you’ll need to open up a business banking account. 

Keeping your business and personal banking account separate is crucial for managing cash flow and complying with tax regulations. Not sure where to open your business bank account? Most banks in the UK offer the option to open a business account. Here are a few of our top picks:

• Tide Business Banking
• Barclays
• Starling Bank

Step 7: Understand your tax obligations

Understanding and fulfilling your tax obligations is a crucial part of running a business in the UK. Regardless of your structure, every business owner must comply with the tax laws to avoid any fines or legal issues. 

Here are the key taxes you need to be aware of:

Income Tax

As a sole trader, you pay income tax on the profits you make from your business. You’ll be required to file a Self-Assessment tax return annually to report your earnings.

Founders in a partnership will also need to pay income tax on their share of the profits, which will be declared through individual Self-Assessment returns.

Corporation Tax

If you’re operating as a limited company or LLP, you’ll need to pay corporation tax on the profits of your business. The corporation tax rate is a flat percentage applied to your company’s profits and it varies depending on the company’s earnings. 

Corporation tax returns must be filed annually and payments should be made before the deadline to avoid penalties.

VAT (Value Added Tax)

If your business has a taxable turnover above the VAT registration threshold (currently £85,000 per year), you’ll need to register for VAT with HMRC. However, you can choose to voluntarily register for VAT even if your turnover is below this threshold, especially if you want to reclaim VAT on business purchases.

As a VAT-registered business, you’ll need to charge VAT on your sales and submit VAT returns quarterly or annually, depending on your VAT accounting scheme. The standard VAT rate is 20%, but certain goods and services may be subject to reduced rates or exemptions.

National Insurance Contributions (NICs)

Sole traders and partners pay National Insurance contributions as part of their income tax responsibilities. There are two classes of NICs for sole traders: Class 2 (fixed weekly contributions) and Class 4 (a percentage of profits).

Directors of limited companies must also pay NICs, but the process is slightly different compared to sole traders and partners. Directors are typically liable for Class 1 NICs, which are deducted from their salary.

NICs contribute to benefits like state pensions and healthcare, so it’s essential to ensure you’re paying the correct amount based on your earnings.

Step 8: Keep accurate business records

It’s important that you keep accurate records and file your taxes. If you don’t, you could be charged hefty penalties. It’s important to get this step right and avoid potential fines. 

Accurate record-keeping is a legal requirement for all businesses, regardless of structure. Proper records help ensure you’re compliant with tax obligations, simplify your financial planning and assist with business decisions. 

Here’s what you need to know about record-keeping:

• Track your income and expenses: Keeping accurate records will help you calculate your profits or losses and thus ensure you’re paying the correct amount of tax. Keep hold of your invoices, receipts, bank statements and any other financial documents
• Make use of accounting software: It can be a bit stressful managing everything yourself. Many businesses opt for accounting software to do the bookkeeping for them. Popular options include Xero or QuickBooks
• Keep your invoices and receipts: It’s important to hold onto all invoices and receipts for accurate record keeping. This will help you keep track of your outgoing and incoming spending
• Retain records: By law, businesses are required to keep and store their records. HMRC recommends keeping records for at least 5 years

If you’re ready to take the next steps and are searching for more information on funding your small business, check out our article: ‘Updated guide for 2024: Government support for small businesses.’

We hope this article has helped you develop your understanding of registering a business in the UK. We regularly update our community members with handy guides and informative resources. If you’d like to receive all the latest tips and guides from us – join our community.