Why and How To Set Up a Limited Company?

Setting up a limited company in the UK is one of the easiest things you'll do as a founder. The whole process can be done very easily and online! It costs roughly £100, and most companies are registered within 24 hours!

I've set up three personally. The first one took me a weekend because I overthought every decision. The second took 40 minutes. By the third, I did it on a train home from Coventry.

But as with all things, there are common pitfalls that trip startup founders up, mostly because the guides they're reading are out of date regarding business activities. Companies House changed its fees on 1 February 2026, affecting the costs of various company formation packages. Online company formation now costs £100, up from £50. There's a new mandatory identity verification requirement for all directors of a company type. The annual confirmation statement went from £34 to £50. If the guide you're reading says £12, close it.

This guide walks you through how to register a limited company in the UK in 2026: from choosing a company name and setting up a business address, to filing your documents and getting your certificate of incorporation.

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Going through this process to form a company? Talk to founders who've done it. Join the discussion in the Startup Networks forum

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Why Set Up a Limited Company?

You don't have to. Plenty of people start as sole traders and do perfectly well. But there are real reasons most startup founders choose to set up a limited company instead. If you're a sole trader you're liable for everything, so very important to look at public liability for sole traders!

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Your personal assets are protected. A limited company is a separate legal entity. If the business runs into debt or gets sued, your house, your savings, and your car are not on the line. As a sole trader, everything you own is fair game. That difference alone is why most founders go Ltd.

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Tax can work in your favour. Corporation Tax on profits up to £50,000 is 19%. A sole trader earning the same pays 20% income tax plus National Insurance contributions on top, which is a requirement for a limited company. The gap gets wider as you earn more. You can also pay yourself through a combination of salary and dividends, which is usually more tax-efficient than taking everything as income in a basic company.

Investors and clients take you more seriously. Banks, VCs, angel investors, and government grant schemes almost all require you to be a registered limited company. Larger clients often will not contract with sole traders, preferring those whose liability is limited. Having "Ltd" after your name signals that you're a proper business, not a side project.

Your company name is protected under the regulations governing limited by guarantee companies. When you register a limited company with Companies House, nobody else in the UK can register under the same name. Without registration, another business could take your name tomorrow.

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You can raise investment once your company has been incorporated. A limited company can issue shares. A sole trader cannot register an official address like a limited company can. If you ever plan to bring in co-founders, investors, or run an EMI share option scheme for employees, you need a limited company structure where liability is limited.

If you're testing an idea with minimal risk and no plans to hire(you'll need employer insurance) or raise money, starting as a sole trader is fine. If you're building something you intend to stick with, set up a limited company from day one. Switching later is doable but annoying.

Before You Start: What You'll Need

Get these ready before you begin the registration process. Having everything to hand is the difference between a 30-minute job and a week of back-and-forth.

• A company name, checked for availability on Companies House and the UK Intellectual Property Office trademark database

• A registered office address, somewhere official post from Companies House and HMRC can go. It's publicly visible, so think about whether you want your home address on the public register.

• Director details: at least one director aged 16 or over. Full name, date of birth, nationality, home address, and occupation.

• Shareholder details: at least one shareholder (can be the same person as the director) is required for any type of limited company. Decide how many shares to issue and at what value.

• A SIC code: a five-digit number that tells Companies House what your business does. Look these up on the Companies House website and pick the one that best matches your main activity.

• Identity verification: since November 2025, all proposed directors and persons with significant control must verify their identity before the company can be registered. This is done through GOV.UK One Login. Takes about five minutes to register your company.

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Step 1: Choose a Company Name

This sounds fun until you discover every good name is taken.

Check Companies House first. Use the free name availability checker to see if your exact name, or anything confusingly similar, is already registered. If "Acme Tech Ltd" is taken, "Acme Technology Ltd" may be rejected too, especially if it does not align with your preferred company name.

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Check for trademarks and ensure your company is usually registered within the legal framework. A name can be available at Companies House but trademarked by another business. Search the available .co.uk and .com domains to ensure your UK business has a strong online presence. gov.uk/search-for-trademark" target="_blank" rel="external nofollow noopener">UK Intellectual Property Office database. If someone has trademarked the name, you'll lose a legal fight even if Companies House let you register it.

Check domain availability before you register. Before you file anything, check whether the .co.uk and .com domains are available to register with Companies House for your business activities. Buy them first to establish your company type. Losing a domain to a squatter while you're filling in paperwork is a special kind of frustrating.

Some words need special permission: "Royal," "Bank," "Authority," "Government," "British," and similar. You cannot use them without approval, and approval is hard to get. Offensive or misleading names are banned outright.

If your first-choice name is taken, try adding a descriptor ("Solutions," "Group," "Studio," "HQ") to make it unique for your company limited by shares. A name you love that's legally contested is worse than a name that's available and works fine.

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Step 2: Choose a Business Address

Every company in the UK needs a registered office address. This is where Companies House and HMRC send official correspondence. It goes on the public register, meaning anyone can look it up.

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You have three options.

Your home address. Free, simple, and perfectly legal. The downside: your home address becomes publicly visible. I did this for my first company and regretted it when someone casually mentioned they'd looked up where I lived. Not dangerous, just uncomfortable.

A physical business address. If you have an office, studio, or co-working space with a fixed address, use that to help in choosing a unique company name. It needs to be in England, Wales, Scotland, or Northern Ireland, matching the country you're registering in.

A virtual office address. Services like Hoxton Mix, Regus, or 1st Formations give you a professional business address, often a London location, for around £10 to £50 per month, making it easier for new companies to establish a presence. Post gets forwarded or scanned. Your home stays private. For most founders, this is the sweet spot between cost and privacy.

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Your registered office does not have to be where you work. It just has to be a real UK address that can receive post.

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Step 3: Verify Your Identity

This is the step that catches people off guard because it's relatively new.

Since 18 November 2025, every proposed director and every person with significant control must complete identity verification with Companies House before the company can be registered, which helps identify what your company is. No verification, no registration.

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You verify through GOV.UK One Login. Upload a photo ID (passport or driving licence), take a selfie, the system matches them. It's like setting up a bank account on your phone. Takes about five minutes.

Once verified, you get a personal code from Companies House. Save it. You can reuse it for future companies because you only verify once.

If you're setting up a company with co-founders, they each need to verify independently before you submit the registration. This is the step that causes delays in forming a limited company. Get everyone verified before you sit down to file.

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For existing companies: all current directors and PSCs need to verify by 18 November 2026. Do not wait for the deadline.

Step 4: Appoint Directors and Shareholders

A UK limited company needs at least one director and at least one shareholder. The director and shareholder can be the same person, so a one-person company works fine.

Company directors run the company and are legally responsible for making sure it complies with company law and limited liability. They must be at least 16 and not be disqualified to act as a company secretary or director. Directors do not need to be UK residents, but the company must have a registered office in the UK. Though worth noting: some banks get difficult about opening accounts if there's no UK-based director. Not a legal issue, but a practical one worth thinking about when deciding on your business structure.

Shareholders own the company, which can be structured as limited by guarantee if desired. They hold shares, vote on major decisions, and receive dividends. You can have one shareholder or hundreds in a company limited by shares, as long as the company must have at least one shareholder.

Persons with significant control (PSCs) are anyone who holds more than 25% of shares or voting rights, or who can appoint or remove a majority of directors. Their details go on the public register once the company has been incorporated. For a single-founder company, you're the PSC.

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Step 5: Set Up Your Share Structure

You need to issue at least one share to create a limited company. Most founders go with 100 ordinary shares at £0.01 each, giving a total share capital of £1.

Why 100 for becoming a limited company? It gives you a clean percentage structure. If you later bring in a co-founder (50 shares each = 50/50) or an investor, the maths is straightforward.Business & Corporate Law

You can create different share classes with different voting rights and dividend entitlements, but do not overcomplicate this at registration. Keep it simple. You can restructure later when you actually need to, usually when you raise investment and a solicitor gets involved anyway.

Step 6: Prepare Your Documents

You need three things to register a limited company with Companies House, including a unique company name and a company number.

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Form IN01 is required to register your company with Companies House. Your application for registration. Includes your company name, registered office address, director and shareholder details, share capital structure, and SIC code.

Memorandum of Association. A short legal statement signed by all shareholders confirming they want to form the company limited by shares, which is essential for business owners. It's a standard document and you don't need to draft it from scratch.

Articles of Association are crucial documents when you form a limited company. The rules for running the company: shareholder rights, director responsibilities, decision-making processes. Companies House provides standard registration services for various business structures. model articles that work for most startups. Use them unless you have a specific reason for custom articles. You probably don't at this stage.Business Formation

Step 7: Register Your Limited Company

You can register online, by post, or through a formation agent to ensure your company incorporation is smooth.

Online registration: £100. The fastest and cheapest route. Processed within 24 hours, often within a few hours. This is how most companies are formed in the UK.

Same-day registration: £156. Available via software filing only to register your company efficiently. Submit before 3pm on a working day, and your company is registered the same day as a limited company must be.

Postal registration: £124. Download Form IN01, fill it in, write a cheque for £124 payable to "Companies House," and post it. Takes 8 to 10 working days.

For the vast majority of founders, online registration at £100 is the obvious choice.

You can register directly through the company formation agent to facilitate your company incorporation. Companies House website.

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Step 8: Using a Formation Agent (Optional)

Companies like 1st Formations, Rapid Formations, and Companies Made Simple handle the whole process for you, ensuring compliance with all company documents and helping you register an official address. They typically charge £15 to £100 on top of the Companies House fee and often bundle extras: a registered business address, help with identity verification, and business bank account introductions.Business & Corporate Law

Worth it if you've never done this before. Not necessary if you're comfortable following a step-by-step process online. The Companies House registration system is genuinely user-friendly.

Business platforms like Tide, ANNA Money, and SeedLegals also offer company formation integrated into their services. Useful if you plan to bank or do legal work through them anyway.

Step 9: Get Your Certificate of Incorporation

Once Companies House approves your application, they issue a Certificate of Incorporation. This confirms your company legally exists and includes your unique Company Registration Number (CRN).Business Formation

With this certificate you can open a business bank account, register for VAT, apply for startup loans and grants, hire employees, and start trading.

Congratulations. Your company exists. Now the real work starts.

Step 10: Register for Corporation Tax and PAYE

This is the bit people forget and then get caught out six months later.

Corporation Tax. When you register a limited company online, HMRC usually gets notified automatically. They'll post you a 10-digit Unique Taxpayer Reference (UTR) within a few days after you register your company type. When it arrives, log into your Government Gateway business account and add Corporation Tax as a service. Do this immediately, even if you're not trading yet. People who put it off forget entirely and miss their first filing deadline. The penalty starts at £100.

PAYE. If you're hiring anyone, including paying yourself a salary as a director, you need to register for PAYE. Dividends do not go through PAYE, but salary does. You can register during the company formation process on many platforms or separately through HMRC, ensuring all company documents are in order and the company is usually registered within the required time frame. Once registered, set up payroll through software like Xero, Sage, or QuickBooks to efficiently run your business.

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Employer NI is 15% on earnings above the £5,000 secondary threshold. The Employment Allowance (£10,500 for eligible employers) can offset this, ensuring your business structure is financially viable. Claim it through your payroll software.

🎥 Watch: Setting Up a Limited Company in the UK

Before you start the registration process, this walkthrough from Honest Money covers the Companies House process step by step in plain English.

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How to Set Up a Limited Company in the UK on YouTube

What Everything Costs

A realistic breakdown of setting up a limited company and running it through year one.

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• Companies House registration: £100 online, £124 postal, £156 same-day

• Formation agents: add £15 to £100 for their service to help you use a company formation agent.

• Confirmation statement: £50 per year online. Filed annually to confirm your company details are correct, including any changes to business activities. Miss the deadline and fines are automatic: £150 for up to a month late, escalating from there.

• Business bank account: free with Starling, Monzo Business, Mettle, and Tide Free. Traditional banks offer 12 to 24 months free for company directors, then £7 to £12 per month for the bank account for your limited company.

• Accountant: £300 to £1,000 per year for a small business accountant, which can provide essential tax services to your business and help you understand the requirements for a limited company. Cloud accounting software (Xero, QuickBooks, FreeAgent) costs £10 to £30 per month and can reduce this cost.

• Registered office address: £10 to £50 per month if you use a virtual office instead of your home address to register your company.

• Business insurance: employers' liability (legally required if you hire staff) from about £100 per year. Public liability from £50 per year is essential for new companies to run your business safely. Professional indemnity from £100 per year.

• VAT registration: free via HMRC. Only mandatory when turnover exceeds £90,000.

• Trademark: £170 for one class at the UK Intellectual Property Office. Worth doing once you're confident in your name.

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A realistic first-year budget for doing things properly: roughly £500 to £2,000 depending on whether you hire an accountant, use a virtual office, and register a trademark. You can do it for under £200 if you cut everything to the bone.

Sole Trader vs Limited Company: The Honest Answer

Choose sole trader if: you're testing an idea with minimal financial risk, your expected profit is under £30,000, you don't plan to hire anyone, you don't need investment, and you want the simplest possible setup with the least admin. Registration is free through HMRC and takes ten minutes.

Set up a limited company if: you're building something with growth ambitions, you plan to hire people at any point, you want to raise investment (you cannot issue shares as a sole trader), you want your personal assets protected from business debts, or your profits are above £30,000 and you want to optimise your tax position.

The practical difference: a sole trader pays income tax (20 to 45%) plus National Insurance on all profits, while a business is a private limited company. A limited company pays Corporation Tax (19 to 25%) on profits, and the director pays income tax only on what they draw as salary or dividends. At higher profit levels, the limited company structure is significantly more tax-efficient.

Most founders reading this should set up a limited company. If you're genuinely just testing a side project for a few months with no money at risk, start as a sole trader and convert later if it works out.Career Resources & Planning

Mistakes I Made Setting Up Limited Companies

I used my home address as the registered office. It went on the public register. I only realised when someone casually mentioned they'd looked up my company number and knew where I lived. Switched to a virtual office. Costs £15 per month, which felt annoying until I thought about the alternative.Business & Corporate Law

I forgot to file my confirmation statement. Got a £150 fine related to company tax. Completely avoidable. Calendar reminders three months before every Companies House deadline, every year, without fail.

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I mixed personal and business finances for the first two months, which complicated my accounting. My accountant's face when I handed over my bank statements was memorable. Open a business bank account in your first week to help set up your business properly.

I picked a SIC code at random. SIC codes matter for some grant applications and industry compliance. Spend two minutes picking the right one.

I didn't get my co-founder to verify their identity in advance. We were ready to register, hit the ID verification requirement, and had to wait three days while they sorted it. Get everyone verified before you sit down to file.

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Frequently Asked Questions

How much does it cost to register a limited company in 2026? £100 online. £124 by post for the company incorporation process. £156 for same-day service is a common fee when you register your company with Companies House. These fees changed on 1 February 2026. Formation agents charge extra on top.

How long does it take? Online registration: usually a few hours, sometimes 24. Postal: 8 to 10 working days. The bottleneck is usually getting everyone's identity verification done, not the Companies House processing time.

Can I set up a limited company if I'm not a UK resident using a company formation service? Yes, you can form your company online. No nationality restrictions. You need a UK registered office address (a virtual office works) and all directors must complete identity verification. Some banks may want a UK-based director for account opening, but it's not a legal requirement.

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Do I need to verify my identity when registering my company type? Yes, you can register a unique company name and form a company when you're ready. Since November 2025, all directors and PSCs must verify through GOV.UK One Login before a company can be incorporated. It's a one-time process and you get a personal code you can reuse for future companies.

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Do I need an accountant to set up a limited company? No. You can register directly through Companies House. But for ongoing Corporation Tax, VAT, payroll, and annual accounts, most founders bring in an accountant eventually to ensure compliance with UK company formation regulations. Cloud accounting software can reduce this cost significantly.

Do I need a business bank account? Yes. A limited company is a separate legal entity, so its finances must be kept separate from yours, which is crucial to run your business effectively. Most digital banks offer free business accounts you can open the same day your company is registered.Business Formation

What is a confirmation statement? An annual filing to Companies House (£50 online) confirming your company details are up to date. Miss it and you get fined automatically. Set a calendar reminder.

Sources

All links below are real and verified.

• GOV.UK: Register a private limited company

• GOV.UK: Companies House fees

• GOV.UK: Check if a company name is available

• GOV.UK: Search for a trademark

• GOV.UK: One Login identity verification

• GOV.UK: Register for Corporation Tax

• GOV.UK: Access to Work

• HMRC: Employment Allowance

• ACAS: Employment contracts

• UK Intellectual Property Office: Search trademarks

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Last updated June 2026. Companies House fees verified against the official schedule effective 1 February 2026. Identity verification requirements confirmed against ECCT Act provisions. Tax rates current for 2025/26 and 2026/27. Always verify current requirements at gov.uk Before filing, make sure you need to register an official bank account for your limited company.

Read next on Startup Networks:

• Sole Trader vs Limited Company: Which One Is Actually Better for UK Startups? - Startup Resources - Startup Networks

• Best Payroll Software for Small Businesses UK 2026: A No-Fuss Guide - All Things Business - Startup Networks

• How to Register a Company in the UK: A Complete Guide for 2026 - All Things Business - Startup Networks, including requirements for a limited company.

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