Company Formation Guide UK 2025
How to Set Up a
Limited Company in the UK
Step-by-step guide to incorporating your limited company — from name to trading
Setting up a limited company in the UK is faster and cheaper than most people realise. With Companies House online registration costing as little as £12, you can have a registered company within 24 hours. But there are several critical steps after incorporation — including tax registrations, bank accounts, and director obligations — that this guide covers in full.
Before You Start — Key Decisions
Before registering, make three decisions:
- Company name — must be unique on Companies House and not too similar to an existing name. Check availability at beta.companieshouse.gov.uk. The name must end in “Limited” or “Ltd”
- Registered office address — a physical UK address that appears publicly on Companies House. This can be your home address, office, or a registered address service
- Share structure — how many shares to issue and to whom. For a simple single-director company, one share of £1 is common. For husband-and-wife setups, consider splitting shares to use both dividend allowances
Don’t use your home address if you can avoid it
Your registered office address is publicly displayed on Companies House forever. Many directors use a registered address service (like Britvex’s virtual office) to keep their home address private and professional.
Complete Step-by-Step Guide
1
24 Hours
Register Your Company at Companies House
Go to beta.companieshouse.gov.uk and complete the IN01 form online. You will need:
- Company name (checked as available)
- Registered office address (UK)
- Director(s) details — name, date of birth, nationality, home address
- Shareholder(s) details and share allocation
- Standard Industrial Classification (SIC) code for your business type
- Memorandum and Articles of Association (standard template available)
Fee: £12 online (same-day service: £78). You will receive your Certificate of Incorporation electronically within 24 hours confirming your registered company number.
2
Within 3 Months
Register for Corporation Tax with HMRC
You must register for Corporation Tax within 3 months of starting to trade. This is separate from Companies House registration. Go to gov.uk and register using your 10-digit Company Registration Number (CRN) from your Certificate of Incorporation.
HMRC will send you a letter with your Corporation Tax UTR (Unique Taxpayer Reference) which you’ll need for future tax returns.
3
Before First Payment
Set Up Payroll and Register as an Employer
If you plan to pay yourself a salary (even a small one), you must register as an employer with HMRC before your first payroll run. Go to gov.uk/register-employer.
You’ll need payroll software (or an accountant) to operate PAYE, calculate Income Tax and NI, and submit Real Time Information (RTI) reports to HMRC each time you pay employees.
4
If Applicable
Register for VAT (if Required)
If your company’s taxable turnover exceeds or is expected to exceed £90,000 in a rolling 12-month period, you must register for VAT. You can also voluntarily register below this threshold.
Register at gov.uk/vat-registration. Under Making Tax Digital for VAT, you must use HMRC-approved software from day one.
5
As Soon as Possible
Open a Business Bank Account
A limited company must have its own bank account, separate from your personal finances. Mixing personal and company funds creates significant accounting and legal problems.
- High street banks: Barclays, HSBC, Lloyds — typically require an in-person appointment
- Digital banks: Tide, Starling, Monzo Business, Revolut Business — open in minutes online, often free
- You’ll need your Certificate of Incorporation, Company Registration Number, and personal ID
6
Before Trading
Set Up Accounting Software
You are legally required to keep accurate company financial records. Set up cloud accounting software such as Xero, QuickBooks, Sage or FreeAgent before you start trading.
Connect your business bank account to your accounting software for automatic transaction imports. This forms the basis of your VAT returns, payroll, and annual accounts.
7
Annually
Annual Filing Obligations
Once your company is trading, you have annual obligations to meet:
- Annual Accounts — filed with Companies House within 9 months of financial year end
- Confirmation Statement — confirm company details annually (£34 fee)
- Corporation Tax Return (CT600) — filed with HMRC within 12 months of financial year end
- Corporation Tax payment — due 9 months and 1 day after financial year end
Company Formation Costs
| Item | Cost | Notes |
|---|---|---|
| Companies House registration (online) | £12 | Most common method |
| Same-day incorporation | £78 | When urgency required |
| Registered office address service | £50–£200/yr | Keeps home address private |
| Business bank account | Free – £15/mo | Digital banks often free |
| Accounting software | £12–£40/mo | Required for MTD compliance |
| Annual confirmation statement | £34/yr | Companies House filing |
| Accountancy fees (annual) | £800–£2,000/yr | Accounts, CT600, payroll, SA return |
Optimal Salary and Dividend Strategy 2025/26
As a director-shareholder, the most tax-efficient approach is to take a low salary (below the NI threshold) and draw additional income as dividends:
| Component | Recommended Amount | Why |
|---|---|---|
| Salary | £12,570/year (£1,047.50/month) | Uses personal allowance, avoids employee NI, qualifies for state pension |
| Dividend allowance | £500 tax-free | First £500 of dividends each year are tax-free |
| Dividends (basic rate) | Up to £50,270 total income | 8.75% dividend tax — far below Income Tax rates |
| Total before higher rate tax | ~£50,270 | Keep income below higher rate threshold for maximum efficiency |
Your Duties as a Company Director
📋 File Annual Accounts
File statutory accounts with Companies House within 9 months of your financial year end. Late filing incurs automatic fines.
🔄 File Confirmation Statement
Confirm your company details are up to date with Companies House every 12 months. Fee: £34 online.
💰 File Corporation Tax Return
File CT600 with HMRC and pay any Corporation Tax within 9 months and 1 day of year end.
📢 Notify Companies House of Changes
Any change of director, address, shareholder or share structure must be notified within 14 days.
🔒 Act in Company’s Interests
Legal duty to act in the best interests of the company, avoid conflicts of interest, and not accept improper benefits.
📊 Maintain Accurate Records
Keep proper accounting records for at least 6 years. Required by both Companies Act and HMRC.
Director’s personal liability is not absolute protection
While limited liability protects shareholders from company debts, directors can be held personally liable if they trade while knowingly insolvent, sign personal guarantees for company debts, or commit fraudulent or wrongful trading. Always seek advice if your company is in financial difficulty.
Frequently Asked Questions
How long does it take to set up a limited company?
Standard online incorporation at Companies House typically takes 24 hours. Same-day service (£78) gets you incorporated within hours. However, allow extra time for bank account opening (1–5 days for digital banks), HMRC registrations (up to 2 weeks for employer PAYE), and VAT registration (up to 30 working days).
Do I need an accountant for a limited company?
Technically no — there’s no legal requirement. However, the annual filing obligations (statutory accounts, CT600, payroll, Self Assessment) are complex and mistakes are costly. Most directors find that an accountant’s fees are quickly offset by tax savings and time saved.
Can I be a director and employee of my own company?
Yes — this is actually the standard setup. As the sole director, you can also be the sole employee and shareholder. You pay yourself a salary (as an employee) and dividends (as a shareholder). The salary goes through PAYE and the dividends are declared from post-tax profits.
What is the Corporation Tax rate in 2025/26?
The main Corporation Tax rate is 25% for companies with profits over £250,000. Companies with profits up to £50,000 pay the Small Profits Rate of 19%. There’s a tapered marginal relief rate for profits between £50,000 and £250,000.