by Maxine Bremner
Published • 13/12/2023 | Updated • 13/12/2023
If you’ve opted to start a business from home, and things have been going well for a while, you may be coming to a point where you’re beginning to outgrow your previous setup as a sole trader or partnership.
Naturally, as your small business evolves you will need to take the next step on your entrepreneurial journey, and change the structure of your company. For many, the next logical step is to become a limited company.
Setting up a limited company in the UK is a popular way for small business owners to expand their operations. There are more than 4 million limited companies in the UK, with more being registered every year.
Not only does becoming a limited company make running a business more tax efficient, but it can also unlock opportunities that aren’t accessible to a sole trader or smaller business entity.
Whilst it can be exciting to seize the business opportunities forming a limited company can provide, it’s natural that you may find it daunting. However, following a proven process and working to a business startup checklist that’s tailored to your situation can make the transition much smoother.
Before you get into the practical steps of setting up as a limited company, note that there are 2 types of limited company in the UK - limited by shares and limited by guarantee.
Though the majority of companies will be limited by shares, it’s important to understand the differences between the two legal structures available to your business before moving forward.
A company that’s limited by shares is the most common type of limited structure in the UK. In this type of company, the liability of your members or shareholders is limited to the amount they have invested in your company in the form of shares.
This means that if you form this kind of company, your personal assets will be protected in case the company incurs debts or legal liabilities.
If the company faces financial difficulties or insolvency, the shareholders' liability is limited to the unpaid portion of their shares.
A company that is limited by guarantee is a relatively uncommon formation, typically used for non-profit organisations, charities, clubs, or professional associations.
Unlike with a company limited by shares, you won’t have shareholders who own the company. Instead, your company will have members or guarantors who provide a guarantee to cover the company's debts up to a specified amount. The guarantors commit to paying a fixed sum in the event of the company's insolvency or winding up.
Whether you’re planning for a limited by shares or limited by guarantee setup, establishing your business as a limited company means you’ll have to tackle a number of different tasks for a proper registration.
The following steps will walk you through each essential phase of setting up your limited company and enjoying the benefits that come with this business structure.
You may have been modelling your entrepreneurial journey on past success stories that went from a side hustle to a limited company in the space of a few years. However, this doesn’t necessarily mean that it’s the right move for you.
Before you proceed with setting yourself up as a limited company, you should first take some time to consider whether this is really the right course of action for you and your business.
There are many potential benefits to running a limited company, though there are also a number of drawbacks to be aware of as well.
It’s most likely that you’ve previously been operating as a sole trader, which is a perfect fit for many solo entrepreneurs. However, as your business grows and you find the resources to keep up with more complex administrative demands, you may want to switch to a limited company structure to take advantage of the greater liability protection, tax benefits, and prestige.
Here’s a closer look at some of the key benefits of setting up a limited company.
If you form a limited company, you can expect to pay less overall tax on the same amount of income compared to sole traders in some cases. However, this isn’t guaranteed, and will depend on your level of turnover as well as the way you take remuneration from the company.
Depending on the level of profit your business makes, you may be able to take your personal income as a combination of an employee salary, and dividends as a shareholder.
There are trade offs to consider in this area, which you should be aware of. If you’re taking a salary, for example, this will reduce the amount of overall profit subject to corporation tax, but will expose your income to a higher level of income tax through standard Pay As You Earn (PAYE) declarations and both employee and employer National Insurance contributions.
Dividends, on the other hand, will exempt you and your business from National Insurance, but you’ll be liable to tax on dividend income which is outside your personal allowance. Most setups involve a combination of both salary and dividend. The right combination will depend on your individual circumstances.
Setting up a limited company always gives you a certain protection from liability should something go wrong.
When you’re a sole trader, you are your business in the eyes of creditors, HMRC, and other entities. In a limited company structure, on the other hand, the business is a distinct legal entity that exists independent of the owner and directors.
This means that if things should go wrong in the future and your business becomes insolvent, you will not be personally liable for your losses.
Turning your operation into a limited company will also add an additional degree of trust and prestige to your business operations.
As a sole trader, the standards of some of your customers and clients will put some opportunities out of reach. In certain contracts, particularly for large businesses in the construction industry, you may be privy to sensitive information and responsible for work with huge implications for the clients.
The risks associated with these projects are high enough that your potential clients will demand a solid guarantee on output, and generally won’t consider sole traders.
By setting up a limited company, you’ll lend your brand the level of trust and authority needed to expand into these high-end projects, and also improve your chances of accessing funding.
Though start up costs aren’t something that all limited companies face, there may be some upfront expenses involved if you’re considering setting up a limited company.
All the legal and financial requirements for establishing your limited company can potentially be managed in-house. However, with limited internal resources, many growing businesses opt to use an outsourced service to navigate the intricacies of becoming a limited business.
These can include tax advice and planning, completing the Companies House registration process, setting up a business bank account, VAT registration, and other services.
As a limited company, you will have to abide by more stringent record keeping requirements, meaning that any outsourced accounting services are going to be more expensive.
Many limited companies are able to grow quickly to meet their administrative requirements. However, it’s still important to remember that record keeping is very different compared to being a sole trader.
As a limited company, you are required to meet strict requirements when it comes to reporting and record keeping including:
Though a lot of small business owners want to make the leap to forming a limited company, it can be more labour intensive and resource draining to meet these administrative demands in-house.
When you form a limited company, it’s also important to note that you’ll be enjoying much less privacy compared to when working as a sole trader. Your limited company records on Companies House will be accessible to competitors, potential investors, and anyone else who might want to look once you hit the threshold.
It’s important to think about the possibility of outside parties learning about your company’s turnover, its ownership, and significant changes to the leadership or structure.
If these have the potential to cause any kind of disruption for your business in its current state, it may be worth holding off and waiting for a more ideal time to form a limited company.
The next step is to choose the name that your limited company will go by in all official capacities.
Many people think of this as one of the less important things to do when setting up a limited company, but it’s important to give this step its due diligence.
As well as the obvious branding implications, there are a number of rules that limited companies have to abide by when naming their company.
Aside from the restrictions around offensive words, there are a number of words and expressions which the UK government forbids using in a business name without express permission.
This includes seemingly benign words such as ‘association’ and place names like ‘Sheffield’, so don’t always check before registering your name, to make sure that you’re in the clear.
Gov.uk maintains a comprehensive list of these words and expressions, which you can use to help check any of your initial naming ideas against.
It may sound obvious, but it’s still common for new limited companies to attempt to start trading under a name that’s already being used by another business.
Aside from checking for banned terms, it’s important to use the Companies House name availability checker to ensure your chosen company name isn’t the same as a preexisting one.
Bear in mind that ‘the same as’ can also mean a company name that’s too similar to one that’s already registered. This means that in some cases you won’t be able to distinguish your company simply by adding a punctuation mark or swapping out a word for a common synonym.
Generally, your limited company’s name must end with ‘Ltd’ or ‘Limited’, for example, Virgin Media Limited.
There are some exceptions to this rule, such as in the case of charities, or if the business is limited by guarantee. It’s also worth noting that if you registered in Wales, you can opt to use this suffix in Welsh (‘cyf’ or ‘cyfyngedig’).
Finally, when considering how to come up with a business name, it must not contain any trademarked words, or words that resemble them too closely. For example, if Companies House has records of a company called ‘Pantineo’, whose name is a registered trademark, an application under the company name ‘Bantineo’ is unlikely to be approved.
Though this may sound obvious, the repercussions of infringing on another business’ intellectual property are huge. When settling on a company name, it’s always worth checking the Government Trademark Register to be 110% sure that you’re in the clear.
Like limited companies that are already successfully registered, once your business is on Companies House, you’ll be legally protected from companies trying to use the same name as yours.
Though it’s not a requirement for setting up a limited company, you can carry out business activities using a name that differs from your registered name if you wish. This alternative name is known as a ‘trading name’.
As with your officially registered company name, your trading name must abide by certain rules, such as not infringing on trademarks, and not including ‘sensitive’ words. Your trading name cannot include the ‘ltd’ or ‘limited’ suffixes, as these are used to designate an official limited company name.
If you’d like to change your company name following incorporation, this is a fairly simple process.
You can do this either by passing a special resolution (a type of vote held within your company) or leveraging permissions that exist in your Articles of Association (a document outlining how your business is managed, more on that later.)
For name changes made through a special resolution, you can then make it official using an online service managed by Companies House, subject to a fee of £8.
Note that although changing a company name is easy, it’s recommended that you avoid doing this too many times for the sake of professionalism and consistency.
When you’re running a business as a sole trader, reporting your business address can be done quickly and easily through your self assessment tax return. However, when you’re setting up a limited company for contracting, you’ll need to exercise greater caution to keep your venture legally compliant.
A limited company can have several addresses. At the very least, Companies House requires you to designate a registered office, a service address, and a directors’ residential address. It’s important to note that after registration, your company address will be publicly available through the Companies House online register, and cannot be removed.
Here’s a quick look at each address associated with limited company registration.
Any postal address from within the same jurisdiction where the business was incorporated (England/Wales, Scotland or N. Ireland) can be used.
Though a residential address can be used, it’s important to bear in mind that this information will be publicly available. It’s best to use a commercial address for the sake of professionalism.
Though this address certainly isn’t mandatory, it can be useful if where you’ve registered your office requires special arrangements for inspection, or if it’s at a residential address and you want to maintain your privacy.
Unlike the other addresses previously covered, there’s no restrictions on where this address can be located, and you can have more than one.
A director is an elected individual within your business who is legally responsible for the running of the company, as well as making sure that relevant accounts and reports are filed with the government.
Within your organisation, they’ll also be responsible for hiring, monitoring, and dismissing executives, setting dividend policies and making sure company executives are compensated.
As a limited company you must have at least one designated director to be registered, which is the next step you need to think about when forming.
This process generally begins with private discussions between yourself and the other company members (shareholders and guarantors) who will decide who to appoint as the director or directors.
If you’re running a small business made up of you and a few cofounders, it’s common to name yourselves as directors.
Following these discussions, the process of appointing directors can begin in a more formal manner, involving two key steps:
With these steps completed, the next phase is to notify Companies House of the appointment using the AP01 form, no more than 14 days after the decisions are made.
When filling this form, you must provide several pieces of information about the business and director, including:
Should your company need to remove a company director, this needs to be done according to the relevant legislation, your articles of association, and any service agreements that exist between the director and your company.
Bear in mind that your business must have at least one director appointed at all times. Should the need to remove a director arise, this is something you’ll need to make provisions for moving forward.
There are three main ways a company director can be removed:
1. Voluntary Resignation: If a director resigns according to the needs of their contract, you simply need to inform Companies House using form TM01, no more than 14 days after their resignation is tendered.
Once processed, the company’s public records including its statutory register of directors will be updated to reflect the change.
2. Removal Under the Articles of Association: The articles of association applicable to limited companies have certain provisions that will require the removal of a director under certain circumstances.
These include provisions from the Companies Act 2006 or another piece of legislation prohibiting a director from staying in office, a bankruptcy order being made against the director, or a registered medical practitioner deeming the director physically unfit for office.
3. Ordinary Resolution: If yourself and other company shareholders become unhappy with your director’s performance, you can vote to remove them through an ordinary resolution.
This requires a simple majority of above 50%. To pass an ordinary resolution, the company’s shareholders must be served a Special Notice at least 28 days before the vote is due to take place. The removal of a director through a resolution must be registered with Companies House using form TM01.
Once you’ve appointed one or more directors, the next thing to think about is appointing shareholders.
As a limited company you must have at least one shareholder to exist as a legal entity. If you’re a small business owner looking to incorporate for the first time, you may start as the company’s sole director and shareholder.
As the business grows, you can opt to appoint more shareholders from among your partners and coworkers.
New shareholders can be brought on by either forming and issuing new shares, or transferring shares that have already been allotted.
Transferring shares is the process of selling or gifting shares from current members of the company to new ones. This is a fairly straightforward procedure, and requires the director to fill in a stock transfer form for the board to accept.
Once a transfer is ratified by the board, it’s the director’s responsibility to issue the new shareholder with a certificate of ownership, and update the statutory register of members for the government’s records. Companies House will be notified of the change of ownership in the next confirmation statement.
If you don’t want to transfer any existing shares, but want to bring new shareholders into the fold, you’ll have to allot new shares.
While allotting new shares will increase the total share capital of your limited company, it will also dilute the value of the preexisting shares.
To allot new shares, directors must make an application to the company, which must be ratified by the board.
Following this approval, the director(s) must submit a Return of Allotment of Shares form, containing the following details:
Following the allotment date, the company has one month to submit the Return of Allotment to Companies House.
After this, the director(s) is responsible for issuing the new member with a share certificate and updating the business’ Companies House records to reflect the current list of shareholders.
Most new limited companies will have flexibility when it comes to the allotment of shares. However, there are usually some stipulations restricting the allotment and transfer of shares.
It’s important to refer to your articles of association and shareholders’ agreement before any allotment is initiated.
Some common restrictions on the allotment of shares include:
In situations where there’s a consensus to bring on a new shareholder, but the allotment is blocked by stipulations in these documents, the restrictions can be amended by passing a special resolution.
Whenever your company makes changes to the share details or list of shareholders, you must report this to Companies House. The updated information will then be reported via the confirmation statement, and published on the company’s public record.
The company director(s) can opt to update this information immediately, or wait until it’s time to file the company’s next confirmation statement.
When reporting a share transfer, you must have accurate records of the number of shares transferred and the date of transfer. When reporting a new shareholder, this information must be accompanied by the shareholder’s name, and the class and quantity of the shares they now hold.
You must also update your company’s statutory registers with the date they joined the company and the details of any shares they’ve taken or transferred.
Registering a company requires you to create three key protocol documents. Government bodies can ask to check these at their discretion, so they must be kept safely in your records to ensure all-around compliance.
Here’s a closer look at these documents.
Though they’re usually spoken about as one entity, your Memorandum and Articles of Association are actually two separate documents.
The memorandum contains details about your company and its members at the point of founding, while the articles of association covers rules about how the company is to be run.
Writing your memorandum
A limited company memorandum needs to follow a uniform structure, and specify certain pieces of information. The required information includes:
When the memorandum is submitted for incorporation, all people who have signed their names on the document will be official members (‘members’ being the legal name for shareholders) of the company. They’ll stay members until they are removed through the processes explained in steps 4 and 5.
The registered members’ details will be published on Companies House under the company details.
Writing your articles of association
Similar to most limited companies in the UK, it’s likely that you’ll be able to use the Companies House model articles for your articles of association.
These are useful templates that can be used to specify how the business is run, and the details of ownership among members.
These templates can be edited according to the specific needs of your business. For example, if you can foresee some kind of conflict between directors and shareholders regarding the future direction of the business, your articles of association can be used to create limitations on certain parties’ decision making power.
The key details covered by the model articles include:
As mentioned, these articles can be amended from the templates provided by Companies House. However, if you wish to make any amendments, such changes will have to be reported to Companies House during incorporation so they can be reviewed and approved.
The Companies Act 2006 stipulates that all limited companies must record their first board meeting by taking minutes.
Generally, this initial board meeting is intended to give directors the chance to talk over some of the formal aspects of the new business formation, review the articles of association, and go over the finer details of each board member’s responsibilities.
If you’re forming a business with a number of collaborators, you’re likely to have a large meeting of directors soon after formation. However, even if you’re the sole director of the company, you’ll still need to record the minutes of your first meeting as a legal requirement.
This may seem strange, but the record is more to prove that your directors were appointed properly than anything else.
While there’s no requirements about the exact topics up for discussion in your first meeting, there are certain key details which you should record in the minutes, including:
The final piece of documentation you need to think about is your share certificates. These are documents certifying that a registered shareholder has part ownership in the company.
These certificates must be issued no more than 2 months after your limited company is registered with Companies House, a requirement which is usually taken care of as part of the company’s first board meeting.
Some of the key pieces of information which should be included on the share certificate include:
To be made official, these certificates must be signed by either two directors or a single director and a witness, usually the designated company secretary.
As a new limited company you are required to submit at least one (Standard Industrial Classification) SIC code. A SIC code is a unique 5-digit number that represents a specific kind of trade the business engages in.
Companies House maintains a list of SIC codes online. Each code represents one of more than 700 different trades or economic activities that a limited business can engage in, sorted into several broad industry groups.
Section A, for example, covers agricultural and outdoor industries, whereas Section K includes financial and insurance activities.
The online list has a search function which can help you filter the list and find an accurate description of the activities your business engages in.
Depending on your industry, you might be able to find a precise description of what your business does, or you may have to go with a more general classification that your business falls under.
When incorporating your business through Companies House, you’ll always need to provide one SIC code as a minimum. This is applicable even if the company is going to be non-trading or dormant for an initial period.
However, if your business covers a few different operations, or is complex enough that it can’t be described accurately using a single code, you may want to use several.
Let’s say, for example, that you’re running a clothing manufacturer that produces men’s and women's garments, along with a variety of accessories. In this scenario, you might want to register under the SIC codes:
A company can register up to 4 SIC codes in order to ensure their records are as accurate as possible.
Be sure to research the available SIC categorisations for a successful incorporation.
Having completed all the previous steps, you’ll now have the necessary information to register your business and officially incorporate it through Companies House.
Before you get started, here’s a summary of the information you’ll need to submit to register your limited company:
Whether you’re registering an online business or a brick-and-mortar, your application will generally be processed within 24 hours of receipt.
At this stage, you’ll have made it through the key components of a standard setting up limited company checklist. However, there are still some more steps to take to ensure that you can begin trading without issue.
The next important step to take care of is opening a UK business Bank Account.
Even if your small business has very few differences from a sole trader setup, using a business bank account rather than a personal account is an important step, and provides a number of benefits for limited companies, including:
Opening a business bank account for your limited company will require certain pieces of information and documentation.
Like any bank account, you’ll need:
Aside from these, you’ll also need to provide certain pieces of information specifically pertaining to your business, including:
All of the UK’s biggest banking brands offer business accounts, as do a wide variety of lesser known providers.
If you’ve spent any time researching your options for business bank accounts, you may already be feeling a little overwhelmed.
Here’s some of the key things to consider when choosing a business bank account:
A lot of business bank accounts will charge monthly fees to their customers. Aside from recurring fees simply for keeping money in your account, you could incur fees for things like depositing and withdrawing cash.
Using your liquid capital efficiently is essential in the early days of your business, and many banks provide offers that avoid these fees altogether, if only for a limited time.
Be sure to research your options carefully and find a business account that minimises the upfront cost of banking.
Many banks operate with limits on the value of the business account transactions you can make in a given period. Furthermore, you may have to work within cash deposit limits, which is a major concern for any limited company in a heavily cash oriented industry.
When you check these kinds of limits against your recent cash flow figures, it may seem like you’re a long way off hitting an average transactional ceiling. However, a lot can change in a short time frame for small businesses, and these limitations can have the potential for serious disruption during periods of growth.
Generally, it’s best to look for accounts with limits that are as high as possible to avoid unnecessary delays.
When you first begin to trade, you’ll likely want to reinvest as much as possible into developing your company and working towards your long-term business goals. However, you may feel the need for building up savings in the future, either to have in case of emergencies or simply to earn interest.
We would recommend retaining a minimum of 6 months’ running costs in the bank, to ensure fluctuations in cash flow don’t impact the day to day running of the business, and minimise the stress associated with late payments.
Many business banking providers offer savings accounts alongside accounts intended for day to day transactions.
There are various types of business savings accounts on the market. Some will accrue interest while still giving you access to your money whenever you should need it.
Others will offer above-average interest rates, but will require you to give notice or meet other stipulations if you wish to transfer or withdraw funds.
Though business savings accounts offerings may look pretty similar at first glance, it’s important to dig into the small print associated with each account and look for a deal that will align best with your needs.
Everyone wants their banking to run like clockwork. However, it’s inevitable that problems will arise at some point, so it’s important to have a support system that you can rely on.
With each potential bank account you look at, be sure to look into the kinds of customer support they promise in their own marketing materials. Past this, you should try to read multiple reviews on impartial platforms like Trustpilot to see how these services hold up with customers that have similar needs to your own.
In an increasingly cashless, digital first world, it’s essential for businesses to stay flexible with their finances. This means being able to accept a wide range of payment methods and to work with transactional platforms that are accessible to your customers.
Most modern business accounts are compatible with card payments and popular digital wallets like Google Pay and PayPal. However, these accounts can vary a lot in how easy it is to set these payments up, and how likely they are to guarantee a seamless payment processing experience.
To futureproof your online payments and general compatibility with digital payment methods, be sure to look for business bank accounts that offer inbuilt compatibility and a smooth experience.
SumUp’s business account has 0 account opening or monthly fees for SumUp customers, and enables you to effortlessly spend, save, and manage money for your limited company.
Value Added Tax (VAT) is compulsory for any business that exceeds a turnover threshold, currently set at £85,000 per year. However, you have the option of registering for VAT even if you’re below this threshold.
Though holding off may seem like the easier option at first glance, this is another important consideration to think about when you’re setting up a limited company in the UK.
Though many business owners default to not registering for VAT until they reach the threshold, there are certain benefits to voluntary VAT registration beforehand.
One of the key benefits is unlocking the ability to claim back your VAT costs. If running your company requires you to meet high overheads and these costs have a VAT element, being able to claim back these expenses can make a big difference to your bottom line.
Expenses like purchasing stock in large volumes, hiring professional consultants, and even building a professional website, can all have a sizable VAT element.
By recouping part of these costs, you’ll be able to keep a cap on your operating expenses, and increase the amount of capital you have available to develop your company.
Another reason some companies voluntarily register for VAT is that it can increase their brand’s credibility at important junctures.
VAT-registered businesses are seen as more credible and trustworthy in many marketplaces. This added credibility can make all the difference in your attempts to develop your business, especially when you’re relatively new in the industry.
Let’s say, for example, you’re running a brick-and-mortar shop selling beauty products you manufacture, and are aiming to start selling to a major retailer.
These big names will have distributors queuing around the block wanting to sell on their shelves. As such, they’ll exercise extreme caution when deciding whether or not to start working with a new brand.
Buying managers will consider a lot of different factors when you approach them as a supplier, and may reconsider working with a business that isn’t VAT registered.
Though it’s no guarantee, being VAT registered early on could help you win more business and avoid missed opportunities.
Reduced expenses and higher credibility can both be attractive prospects as a new limited company. However, these advantages will often come at a cost.
Before making any decisions, it’s important to consider the potential downsides to registering your business for VAT under the threshold, such as:
This is an especially important consideration for small retailers who already have to deal with fierce competition. Before you’re able to offer a lower price for services or products than your larger competitors, it’s important to avoid increasing your prices by 20% while it’s still possible.
Budgeting and filing VAT can be quite complex, depending on your industry. Retailers that import or export across multiple European jurisdictions, for example, will accrue VAT from several countries and pile on administrative requirements.
In the worst cases, this can lead to claims falling through the cracks and the potential of penalties for late filing.
Making the decision to register for VAT before your turnover reaches the threshold will depend on a variety of factors.
Be sure to investigate what VAT registration means for your business according to your sector, your potential cash flow upside, and other factors before you come to a decision.
If your business is eligible for VAT, SumUp provides intuitive software to create free VAT invoices to help streamline the process and ease the burden of VAT related admin.
As a limited company, you’ll be liable to pay corporation tax on your profits.
Once you start trading, you’ll need to register for corporation tax no more than 3 months after you start business activity, and submit your first tax return as a limited company 12 months after the end of your first financial year of business.
Unlike VAT, there’s no threshold for corporation tax. This means that you’ll need to pay corporation tax as a proportion of your profits as long as you’re operating as a limited company, regardless of how small your business is or the kind of turnover you’re reporting.
It’s important to note that the 3 month deadline for registration begins when you start any business activity, and not when you begin actually trading and turning a profit.
In the eyes of the government, ‘business activity’ can cover a range of things, including advertising, renting or buying commercial premises, managing investments, and earning interest from your business’ assets. Even if your limited company’s entire first year is focussed on the most rudimentary parts of your business plan and the company ends up making a loss, you’ll still need to register and submit a tax return.
Before you register for corporation tax, you’ll first need to create a Government Gateway user ID.
From there, you’ll need to provide HMRC with several pieces of information in the corporation tax registration process, including:
The information that’s submitted in your corporation tax registration will be used by HMRC to determine your accounting period for corporation tax and your deadline for submitting a return.
After registering for corporation tax, HMRC will send an activation PIN to the office address you submitted.
This code will give you access to HMRC’s online services including the portal used to submit a tax return. Bear in mind that this PIN will expire, and you should aim to activate your online services as soon as possible after receiving it.
With the relevant information acknowledged by HMRC and access to your online tax account, you’ll be all set to file corporate tax returns and pay the tax you owe at the end of each financial year.
If you’re planning a recruitment drive or you’ve already got a workforce lined up to join your business, the final step in setting up a limited company is legally registering as an employer.
Registering as an employer is a legal requirement for practically all limited companies, and allows you to deduct National Insurance and Income Tax from the payments made to employees.
No matter the size of your business, you’ll have to do these things if you:
Bear in mind that if you don’t meet any requirements, but still employ people as an unregistered employer, you’ll still need to keep detailed records on what you’re paying them in order to stay tax compliant.
Having completed the previous step, you should be set up with a business tax account through HMRC’s online services. To register as an employer, sign in to your account, then navigate to the option to register for additional taxes.
HMRC will already have many of the necessary details needed to register as an employer following your registration for corporation tax. However, you’ll still need to provide several other pieces of information, including:
Once you’ve registered as an employer, you’ll receive a confirmation letter from HMRC within 10 working days. This will contain unique PAYE and Accounts Office references.
You’ll need these references to complete payroll related tasks, such as paying PAYE income tax and National Insurance Contributions (NIC). This information will also be used to create properly formatted payslips for your employees.
When the registration is complete, you’ll have everything you need to make the required monthly payments to HMRC, such as National Insurance, Income Tax, and any other deductions owed through employment.
Forming a limited company for the first time can mark an exciting new chapter in the life of any entrepreneur.
We hope that by following this guide, you’ll be able to navigate the red tape, make the right calls, and form a limited company that will see plenty of success in the future.
. learn about our Point of Sale solutions and learn how their streamlined features can make managing your cash flow that much easier.
Disclaimer: The contents of this page are intended for informational purposes only and should not be construed as professional advice. For matters requiring legal or financial expertise, it’s recommended to seek guidance from qualified professionals.
If you’re able to handle all the administrative tasks yourself, then setting up a limited company can cost as little as £12, this being the online incorporation fee required by Companies House.
However, the other requirements around setting up a limited company in the UK, such as drawing up company documents, setting up a business bank account, and getting a business address and phone number, can all generate further costs.
The total cost of setting up your limited company will depend on your specific requirements and the resources you have to establish your company.
Setting up a limited company requires you to collate several pieces of information, including a company name, registered office address, and certain details about your director, shareholders, and company secretary.
How long this whole process takes can vary greatly from one business to another, and will depend on the specific challenges you face when trying to organise this information.
Once you have everything ready, the actual online incorporation process will only take a matter of minutes.
There are several benefits of setting up a limited company compared to other UK business structures. Some of the most significant perks are:
Yes. The Companies Act 2006 stipulates that limited companies must have a separate bank account, which must be opened under the name of the company. Managing the business’ finances through the directors’ or shareholders’ personal bank account is illegal.