Setting Up a Limited Company in the UK: Step-by-Step Guide

Setting up a limited company in the UK is straightforward and can be completed in 24 hours online. The process costs between £12 and £50 depending on how quickly you need the company registered. This guide walks you through everything from choosing your company name to what happens after incorporation.

What You Need Before Starting

Before you begin the incorporation process, gather the following information:

You don't need to have a business bank account, VAT registration, or even a trading name figured out before incorporation. These can all come later.

Choosing Your Company Name

Your company name is more important than it might seem. It appears on all official documents, invoices, and your public Companies House listing.

Name requirements:

• Must end with "Limited" or "Ltd" (or Welsh equivalents)
• Cannot be the same as an existing registered company
• Cannot use restricted words without permission (e.g., "Royal", "British", "Authority")
• Cannot be offensive or suggest illegal activity

Checking availability:

Use the free Companies House name checker to see if your chosen name is available. Note that names that are too similar to existing companies may be rejected.

Restricted words:

Certain words require approval from relevant bodies:

• "Bank", "Insurance" - require Financial Conduct Authority approval
• "Chartered" - requires Privy Council approval
• "Royal", "Prince", "King" - require Cabinet Office approval
• "Dentist", "Pharmacy" - require approval from professional bodies

For most standard business names, you won't encounter these restrictions.

Trading names:

Your company can trade under a different name from its registered name. For example, "ABC Solutions Ltd" could trade as "SuperWidget". However, your registered name must appear on all official correspondence and your website.

Registered Office Address

Every UK limited company must have a registered office address in the same country where it's incorporated (England/Wales, Scotland, or Northern Ireland).

What the registered office is used for:

• All official correspondence from Companies House and HMRC
• Legal documents and formal notices
• Publicly visible on the Companies House register

Options for your registered office:

1. Your home address: Free, but visible publicly
2. Your business premises: Appropriate if you have a physical office
3. Registered office service: £30-150/year for a professional address and mail forwarding
4. Your accountant's address: Some accountants offer this as part of their service

Your home address being on public record is fine for many people, but consider a registered office service if you're concerned about privacy or want a more professional appearance.

Director Details Required

Every company needs at least one director who is a real person (not another company) aged 16 or over.

Information required for each director:

• Full legal name (including former names if changed in last 20 years)
• Date of birth (month and year are publicly displayed)
• Nationality
• Occupation
• Service address (can be the company's registered office)
• Residential address (kept private, only shared with credit reference agencies)

Directors have legal duties under the Companies Act 2006, including acting in the company's best interests, avoiding conflicts of interest, and exercising reasonable care and skill. See our first year limited company guide for what directors must do after incorporation.

Selecting Your SIC Code

The Standard Industrial Classification (SIC) code describes your business activity. You need at least one, and can have up to four.

How to choose:

1. Search the Companies House SIC code list
2. Choose the code that best describes your main business activity
3. Add secondary codes if your business has multiple activities

Common SIC codes:

Don't overthink this. The SIC code affects some statistics but has no bearing on what business activities you can actually carry out. You can change it later via your Confirmation Statement.

Shareholder Structure Decision

Shareholders own the company through shares. As a single founder, you'll typically be both director and shareholder.

Decisions to make:

1. Number of shares: 100 or 1,000 shares is common (makes percentage calculations easy)
2. Share value: £1 per share is standard, but can be any amount
3. Share classes: Ordinary shares are simplest; multiple classes allow different voting or dividend rights

For a solo founder:

The simplest structure is:

• 100 ordinary shares at £1 each
• You hold all 100 shares
• Total share capital: £100

You don't need to pay for the shares immediately. They can be "unpaid" until you're ready.

For multiple founders:

Agree on ownership percentages before incorporation. Common arrangements:

• 50/50 split for two equal partners
• Weighted split based on investment or expected contribution
• Reserved shares for future employees (often via an options pool)

Get a shareholders' agreement if there are multiple shareholders. This covers what happens if someone wants to leave or there's a dispute.

The Incorporation Process

You can incorporate a UK limited company yourself or use a formation agent. Here's how each option works.

DIY: Companies House Web Incorporation Service

Process:

1. Go to Companies House Web Incorporation Service
2. Create a Government Gateway account if you don't have one
3. Choose your company type (most choose "Private limited by shares")
4. Enter your company name
5. Add registered office address
6. Add director details (name, DOB, nationality, address)
7. Add shareholder details and share structure
8. Select SIC codes
9. Choose your articles of association (model articles work for most)
10. Review and submit
11. Pay the fee

Documents created automatically:

• Memorandum of Association (statement that subscribers wish to form a company)
• Articles of Association (rules governing how the company operates)
• Form IN01 equivalent (application for registration)

You don't need to prepare these separately when using the web service.

Costs and Timeline

The £12 online option is perfectly adequate for most people. Same-day service is only necessary if you need to open a bank account or sign contracts immediately.

Formation Agents vs DIY

Formation agents are companies that handle incorporation on your behalf. They're popular but not necessary.

What agents typically include:

• Company formation at Companies House
• Digital copies of incorporation documents
• Registered office address (often for first year)
• Pre-printed share certificates
• First board minutes templates
• Sometimes: business bank account referrals

When to use a formation agent:

• You want a registered office address included
• You need additional documents (share certificates, minutes templates)
• You're setting up a complex structure (multiple share classes, corporate directors)
• You want ongoing company secretary services

When DIY is fine:

• Simple single-director, single-shareholder company
• You're comfortable filling out online forms
• You'll use your home or office as registered office
• You just want the company registered quickly and cheaply

Typical agent costs:

Popular formation agents include Rapid Formations, 1st Formations, and Companies Made Simple. They all do essentially the same thing.

What Happens After Incorporation

Once your application is accepted, several things happen automatically and others require action from you.

Immediately Upon Incorporation

You receive:

• Certificate of Incorporation (digital or paper)
• Company number (8-digit unique identifier)
• Confirmation of registered office and directors
• Authentication code (needed to file online with Companies House)

Your company is now legally registered and can enter into contracts, open bank accounts, and begin trading.

Within Days: UTR Number from HMRC

HMRC is automatically notified when a new company is incorporated. They will:

1. Create a Corporation Tax record for your company
2. Send your Unique Taxpayer Reference (UTR) by post to your registered office
3. This typically arrives within 2-3 weeks

Keep this UTR safe. You'll need it for all tax correspondence and when setting up accounting software.

Within 3 Months: Register for Corporation Tax

Even though HMRC creates a record automatically, you must formally register for Corporation Tax within 3 months of starting to trade.

How to register:

1. Go to HMRC's Corporation Tax registration
2. You'll need: Company UTR, company registration number, date you started trading, accounting period end date
3. Registration takes about 10 minutes online

"Starting to trade" means when you begin carrying on business activities, not necessarily when you make your first sale. If you buy stock, advertise, or enter into business contracts, you've started trading.

Set Up a Business Bank Account

You must keep company finances separate from personal finances. This isn't optional.

What you need to open an account:

• Certificate of Incorporation
• Company registration number
• ID documents for all directors
• Proof of address for all directors
• Details of company's business activities

Digital banks like Starling, Tide, Revolut, and Monzo offer free accounts and can be opened in 1-3 days. Traditional banks (NatWest, Barclays, HSBC) take 2-4 weeks but may be preferred by some clients or lenders.

Register for VAT (If Applicable)

VAT registration is mandatory if you expect turnover to exceed £90,000 in your first 12 months. You can voluntarily register below this threshold.

Consider voluntary registration if:

• Your customers are VAT-registered businesses (they can reclaim the VAT you charge)
• You'll have significant startup costs (you can reclaim VAT on purchases)
• It makes your business appear more established

Don't register if:

• Your customers are mainly consumers (they can't reclaim VAT)
• Your margins are thin and adding 20% would price you out
• Your turnover will stay well under the threshold

See our full VAT threshold guide for more details.

Register for PAYE (If Taking a Salary)

If you plan to pay yourself a salary, you must register as an employer with HMRC before your first payday.

Register as an employer on HMRC's PAYE service, set up payroll software, and file reports each time you pay yourself. Most directors pay themselves a combination of salary and dividends for tax efficiency. See our guide on optimal director's salary.

Set Up Your Accounting System

From day one, you need to track all income, expenses, assets, and liabilities. This isn't just good practice; it's a legal requirement.

Options:

1. Cloud accounting software: Xero, FreeAgent, QuickBooks, AccountsOS
2. Spreadsheets: Legal but error-prone and time-consuming
3. Accountant: Can handle everything but expensive for basic bookkeeping

Whatever system you choose, use it from day one. Trying to reconstruct a year of transactions at year-end is painful and often incomplete.

AccountsOS is designed specifically for UK limited company directors. It auto-categorises transactions, tracks your deadlines, and lets you ask questions in plain English. At £19/month, it's a fraction of what you'd pay an accountant for basic bookkeeping.

Common Formation Mistakes

1. Using a name too similar to a competitor

Companies House may accept it, but you could face a trademark dispute later. Check the UK trademark register as well as company name availability.

2. Forgetting to note your accounting reference date

Your first accounts deadline is calculated from your incorporation date. Note when accounts are due immediately.

3. Not setting up proper share documentation

If you have multiple shareholders, get a shareholders' agreement. Disputes between founders are common and expensive without clear documentation.

4. Using your home address without considering privacy

Your registered office address is publicly visible. Anyone can look it up. If this bothers you, use a registered office service.

5. Choosing the wrong share structure

For a single founder, this doesn't matter much. For multiple founders, get advice before incorporation. Changing share structures later is complicated and potentially expensive.

6. Not registering for Corporation Tax on time

You have 3 months from starting to trade. Miss this and you could face penalties.

7. Mixing personal and company finances from day one

Open a business bank account immediately and use it for all business transactions. Mixing finances causes problems with tax calculations and makes your accounts messy.

First Deadlines After Incorporation

Mark these dates in your calendar as soon as you incorporate:

For example, if you incorporate on 1 February 2025:

• Register for CT by 1 May 2025 (if trading from incorporation)
• Confirmation Statement due by 15 February 2026
• First accounts due by 1 November 2026 (covers 1 Feb 2025 to 28 Feb 2026)

Your accounting reference date (ARD) is automatically set to the last day of the month of your incorporation anniversary. So a February incorporation means a 28/29 February year-end.

See our complete guide to limited company accounting requirements for all the filings you'll need to make.

Frequently Asked Questions

Can I set up a limited company if I'm employed full-time?

Yes. There's no restriction on running a limited company while employed. However, check your employment contract for any clauses about outside business interests or conflicts of interest. Some employers require you to notify them or seek approval.

How much does it cost to run a limited company each year?

Basic annual costs include: Confirmation Statement filing (£34), accounting software (£120-400/year), and potentially a registered office service (£50-150/year). If you use an accountant for year-end accounts, add £300-1,000+. Total minimum: around £200/year excluding accountant fees.

Can I be a director if I've been bankrupt?

It depends. Undischarged bankrupts cannot act as company directors without court permission. Once discharged from bankruptcy, you can usually become a director again, though some Bankruptcy Restriction Orders may extend the restriction.

Do I need to have a company secretary?

No. Private limited companies are not required to have a company secretary. You can appoint one voluntarily if you want someone to handle administrative tasks, but it's not mandatory.

Can I change my company name after incorporation?

Yes. File form NM01 with Companies House (£8 fee) after passing a special resolution. The new name must meet the same requirements as original registration (unique, not restricted, etc.). The change typically takes 1-2 working days to process.

What's the difference between Ltd and Limited?

Nothing. They're legally equivalent. "Ltd" is simply an abbreviation of "Limited". You can use either in your company name. Most people choose "Ltd" as it's shorter.

Can I incorporate a company with no money?

Yes. You can issue shares with a nominal value (e.g., 1 share at £1) and leave them unpaid initially. The £12 incorporation fee is the only immediate cost. However, you'll need to pay for shares before taking dividends from the company.

Do I need a physical office to incorporate?

No. You need a registered office address, which can be your home address, a PO Box (in some cases), or a registered office service. Many successful businesses operate entirely remotely with no physical office space.

Next Steps After Incorporation

Once your company is set up, your priorities are: open a business bank account, set up accounting from day one, register for Corporation Tax within 3 months, and decide on VAT and PAYE registration.

For a complete month-by-month guide to your first year, see our first year limited company guide.

Ready to incorporate? The Companies House Web Incorporation Service at gov.uk is the cheapest and fastest option. For ongoing accounting support after incorporation, see how AccountsOS works for UK limited company directors.