Starting a limited company in the UK can be a rewarding decision, offering limited liability protection, potential tax advantages, and a more professional business image. The process is more structured than registering as a sole trader, but it is straightforward when approached step by step. This guide covers everything from choosing a company name and registering with Companies House, through to your ongoing compliance obligations and the formation services and tools available to help.
This guide is for informational purposes only and does not constitute legal or financial advice. Always seek professional advice tailored to your specific circumstances before making decisions about your business structure.
What is a Limited Company?
A limited company is a business structure that offers limited liability to its shareholders. This means that if the company incurs debts or faces legal claims, shareholders’ personal assets are protected — their liability is limited to the value of their shares. There are two main types of limited company in the UK:
- Private Limited Company (Ltd): The most common type, suitable for small to medium-sized businesses. Owned by private shareholders and not listed on the stock exchange.
- Public Limited Company (PLC): Can sell shares to the public and is subject to stricter regulatory requirements, including a minimum share capital. Typically used by larger businesses.
Key Point: Separate Legal Entity
Unlike a sole trader, a limited company is a separate legal entity from its owners. The company can own assets, enter contracts, and incur liabilities in its own right. This separation is the foundation of limited liability protection.
Step 1: Choose a Company Name
Your company name must be unique and must not be too similar to an existing registered company name. There are a number of rules to follow:
- The name must end with “Limited” or “Ltd”
- It must not contain offensive or sensitive words unless you have explicit permission from the relevant authority
- Check name availability using the Companies House name availability tool at gov.uk before proceeding
💡 Tip
Check whether your preferred name is also available as a domain and on social media platforms before committing to it. Many formation services include a name availability check as part of their registration process.
Step 2: Register a Company Address
Every limited company must have a registered office address in the UK. This is the official address where legal documents and correspondence from Companies House and HMRC will be sent. It must be a physical location — it can be your home address, a commercial premises, or a virtual office address provided by a registered service. The address will be publicly visible on the Companies House register.
Using a Virtual Office Address
If you prefer not to use your home address, a virtual office service provides a professional registered address — typically in a major city — and handles mail scanning and forwarding on your behalf. Several formation services include this as an optional add-on.
Step 3: Appoint Directors
A private limited company must have at least one director. Directors are legally responsible for running the company and ensuring it meets its statutory obligations — including filing accounts and confirmation statements on time, and acting in the best interests of the company. You can also appoint a company secretary, but this is not a legal requirement for private limited companies.
Identity Verification Requirement (From November 2024)
From November 2024, all directors and persons with significant control (PSCs) must verify their identity with Companies House through an Authorised Corporate Service Provider (ACSP). Always ensure you use a registered ACSP when forming your company. Source: gov.uk
Step 4: Allocate Shares and Identify Shareholders
When forming your company you must issue shares to the initial shareholders (also known as subscribers). You will need to decide how many shares to issue, the nominal value of each share (typically £1 per share), and how shares are distributed among shareholders. Shareholders own the company in proportion to their shareholding, and share ownership determines how dividends are distributed.
Step 5: Memorandum and Articles of Association
Two constitutional documents are required to form a limited company:
- Memorandum of Association: A legal statement signed by all initial shareholders agreeing to form the company.
- Articles of Association: The rules for running the company, agreed upon by the shareholders and directors. Standard templates are available from Companies House, or you can draft bespoke articles to suit your specific needs.
Most businesses use the model articles provided by Companies House, which are suitable for standard company structures. Bespoke articles are generally only needed for more complex arrangements involving multiple share classes or investor agreements.
Step 6: Select SIC Codes
SIC (Standard Industrial Classification) codes classify your company’s business activities. You must select at least one SIC code when registering, and you can choose up to four if your business operates across different areas. SIC codes are used for statistical purposes and help categorise the nature of your business for Companies House and other government bodies.
How to Find the Right SIC Code
- Use the Companies House SIC code list at gov.uk to search for codes relevant to your business
- Select up to four codes if your business operates across multiple sectors
- Ensure the code(s) you choose accurately reflect your main business activities
Example SIC Codes
- 62012 — Business and domestic software development
- 70229 — Management consultancy activities (other)
- 47110 — Retail sale in non-specialised stores with food, beverages or tobacco predominating
- 41202 — Construction of domestic buildings
Step 7: Register with Companies House
To officially form your company, you must register it with Companies House. This can be done online, by post, or through an authorised formation agent. You will need to provide your company name, registered office address, details of directors and shareholders, your Memorandum and Articles of Association, and your selected SIC code(s).
Registration Fees
The Companies House registration fee is £100 for online applications submitted directly. Some authorised formation agents offer registration at lower cost — for example, Tide charges £24.99 for its formation service, which includes an instant business bank account. Once registered, you will receive a Certificate of Incorporation confirming your company’s legal existence. Source: gov.uk/register-a-company-online
Step 8: Register for Corporation Tax
Within three months of starting to trade, you must register for Corporation Tax with HMRC. You will need your company’s Unique Taxpayer Reference (UTR), which is sent to your registered office address shortly after incorporation. You can register directly via the HMRC website at gov.uk/register-for-corporation-tax.
Corporation Tax Rate (2024/25)
The main rate of Corporation Tax is 25% for companies with profits over £250,000. A small profits rate of 19% applies to companies with profits of £50,000 or less, with marginal relief available between these thresholds. Source: gov.uk/corporation-tax-rates
Step 9: Set Up a Business Bank Account
Unlike sole traders, limited companies are legally required to have a dedicated business bank account. Because a limited company is a separate legal entity from its directors and shareholders, all company finances must be kept entirely separate from personal funds. Most banks and fintech providers offer accounts specifically designed for limited companies, with varying fee structures, features, and FSCS protection status.
What is FSCS Protection?
The Financial Services Compensation Scheme (FSCS) protects eligible deposits up to £120,000 per authorised institution if a bank or building society fails. Not all fintech providers are FSCS-covered — some operate as e-money institutions, which carry different protections. Always check the protection status before depositing significant funds.
Step 10: Comply with Ongoing Legal Requirements
Running a limited company involves ongoing compliance obligations that differ significantly from operating as a sole trader. Missing deadlines can result in automatic penalties, and persistent non-compliance can lead to the company being struck off the register.
- Annual Confirmation Statement: Confirms that the information held by Companies House is accurate. Filed at least once a year.
- Annual Accounts: Statutory financial accounts must be filed with Companies House each year. These are also publicly accessible.
- Corporation Tax Return: A tax return must be filed with HMRC and any Corporation Tax due paid within nine months and one day of the company’s year end.
- VAT Registration: Required if your VAT-taxable turnover exceeds £90,000 in a rolling 12-month period.
- Payroll and PAYE: If you employ staff — including yourself as a director taking a salary — you must register as an employer, operate PAYE, and enrol eligible employees into a workplace pension.
You can register a limited company directly with Companies House for £100, but authorised formation agents can simplify the process considerably — handling identity verification, document preparation, and in some cases providing a business bank account as part of the same service. From November 2024, all formation agents used for identity verification must be registered with Companies House as an Authorised Corporate Service Provider (ACSP). Below are three well-regarded options.
Registration cost: £24.99 one-time (saving £75 vs. registering directly at £100)
ACSP registered: Yes
Business account included: Yes — free Tide account
Tide is trusted by over 1.5 million businesses across the UK and is one of the most streamlined options for new founders, combining fast limited company registration with an instant business bank account. As a registered ACSP, Tide can verify your identity on behalf of Companies House — a requirement from November 2024. Certificate of Incorporation is typically emailed within one business day.
- Certificate of Incorporation emailed within one business day
- Free Tide business bank account included
- Confirmation Statement filing included (Companies House fees covered)
- Tracking of key filing deadlines
- ACSP identity verification included
- Optional add-ons: Virtual Office Address (Central London), card readers, Tide Accounting
- Full refund if application is rejected
Registration cost: From £100 (Business Launch plan — Companies House fee)
ACSP registered: Yes
Business account included: Yes — Pay-As-You-Go ANNA account
ANNA Money offers an all-in-one company formation and ongoing business management service with a 24/7 Cardiff-based support team available for HMRC and Companies House queries. Unlike many formation agents, ANNA goes beyond registration — offering tiered plans that cover everything from basic admin through to full tax filing, payroll management, and a prime London virtual office address. ANNA is a registered ACSP and handles ID verification as part of the registration process.
ANNA Plan Comparison
| Plan |
Price |
Key Inclusions |
| Business Launch |
£100 |
Company registration + ID verification, first Confirmation Statement, all company changes, 24/7 support, Pay-As-You-Go business account |
| Business Support |
£199/year + VAT |
Free registration, full business secretarial support, prime London virtual office, Pay-As-You-Go business account, Confirmation Statement filing |
| Total Support |
£399/year + VAT |
Free registration, year-end accounts + Corporation Tax filing, Payroll setup, prime London virtual office, full business account with free transfers + international payments |
All prices correct at time of writing. VAT applies where stated.
Registration cost: £100 Companies House fee (reimbursed when you spend £100 on your Countingup card within 30 days — terms apply)
ACSP registered: Yes
Business account included: Yes — free 3-month trial with built-in accounting software
Countingup is an official HMRC Company Formation Agent and registered Trust and Company Service Provider. It combines company formation with a built-in accounting software business current account, making it a cost-effective choice for small limited companies that want banking and bookkeeping in one place. Most applications are processed within hours, with the majority of companies registered by the next working day.
- Company name availability search included
- ACSP identity verification included
- Certificate of Incorporation and all incorporation documents by email
- Free 3-month trial of business current account with built-in accounting software
- Full refund issued if application is rejected
- UK residents only
Best Accounting Software for Limited Companies
Managing the finances of a limited company involves more complexity than sole trader accounting — you will need to prepare statutory annual accounts, file a Corporation Tax return, and operate payroll if you take a salary. Choosing the right accounting software from the outset makes this significantly more manageable, and ensures you are ready for Making Tax Digital as the rollout continues.
FreeAgent
Price: Free with certain bank accounts; from £19/month for sole traders, from £33/month for limited companies
Who it’s for: Sole traders, limited companies, landlords, accountants
MTD-Ready: Yes
FreeAgent is built around the day-to-day tasks that small business owners actually deal with: invoicing, expense management, time tracking, and tax deadline reminders. It handles Self Assessment, Corporation Tax, and VAT returns with direct HMRC submission. Notably, FreeAgent is available free of charge if you bank with NatWest, Mettle, Royal Bank of Scotland, or Ulster Bank.
- Prepare and file Corporation Tax returns and annual accounts
- Submit MTD-compliant VAT returns directly to HMRC
- Send invoices, estimates, and accept one-click payments
- Track projects and time with Smart Capture
- Connect your bank with smart categorisation
- UK-based customer support
The Accountancy Partnership
Price: From £22.50/month (fixed fee — no surprise bills)
Who it’s for: Sole traders, limited companies, and small businesses wanting full-service accountancy
Status: Qualified accountants; HMRC-regulated submission
The Accountancy Partnership provides comprehensive online accountancy services across the UK for a transparent, fixed monthly fee. Their all-inclusive package assigns you a dedicated accountant who handles your financial statements and tax submissions, with unlimited support through phone, email, and live chat. For limited company directors who would rather focus on running their business than managing compliance, this model offers professional expertise at a predictable cost.
- Dedicated accountant assigned to your business
- Annual accounts, Corporation Tax return preparation and submission
- Unlimited support via phone, email, and live chat
- User-friendly online accounting software included
- Automatic deadline notifications
- Annual tax efficiency reviews
- HMRC investigation representation if required
Company formation costs are generally treated as capital expenditure and are not tax deductible, as they are incurred before the company begins trading. However, ongoing compliance costs — such as Confirmation Statement fees, printing annual accounts, and holding shareholder meetings — are treated as trading expenses and may be deductible against Corporation Tax. If you paid formation costs from your personal funds, the company can reimburse you. Always consult a qualified accountant for advice specific to your circumstances.
Limited Company FAQs: People Also Ask
How long does it take to register a limited company?
Online applications submitted directly to Companies House are typically processed within 24 hours. Some authorised formation agents — including Tide and Countingup — aim to have most applications processed within hours. Note that Companies House does not operate on weekends or bank holidays, so applications submitted during these periods will be processed on the next working day.
What is the difference between a sole trader and a limited company?
The key differences are legal structure and liability. A sole trader and their business are the same legal entity — the owner is personally liable for all business debts. A limited company is a separate legal entity; shareholders’ personal assets are protected from business debts. Limited companies also have greater tax planning flexibility (paying a salary and dividends), but face more administrative obligations, including filing annual accounts at Companies House.
How should a limited company director pay themselves?
Most limited company directors pay themselves a combination of a low salary (up to the National Insurance threshold to avoid NICs) and dividends from company profits. This is generally more tax-efficient than taking a higher salary, as dividends are taxed at lower rates than employment income. The optimal split depends on your personal circumstances — a qualified accountant can model the most efficient approach for you.
When does a limited company need to register for VAT?
VAT registration is required when your VAT-taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect to exceed this threshold within the next 30 days. You must register within 30 days of crossing the threshold. Voluntary registration is also possible at any time, which may be beneficial if you have significant VAT-bearing costs or if your customers are VAT-registered businesses.
What is an Authorised Corporate Service Provider (ACSP)?
From November 2024, all directors and persons with significant control (PSCs) must have their identity verified by Companies House before a company can be incorporated or changes filed. An ACSP is a formation agent or corporate service provider that is registered with Companies House and authorised to carry out this identity verification on their behalf. When using a formation service, always confirm they are a registered ACSP.
What is a Confirmation Statement and when is it due?
A Confirmation Statement (formerly the Annual Return) is a filing that confirms the information held about your company at Companies House is accurate and up to date. It covers details such as your registered address, directors, shareholders, and share structure. It must be filed at least once every 12 months. The filing fee is £34 when filed online. Failure to file is a criminal offence and can result in the company being struck off the register.
Considering sole trader status instead?
If you are still weighing up whether a limited company is the right structure for you, our companion guide “How to Register as a Sole Trader in the UK” walks you through the simpler registration process, tax obligations, and the key differences between the two structures — so you can make the right choice for your situation.
Disclaimer: This guide is provided for general informational and educational purposes only. It does not constitute financial, legal, or tax advice. Tax rules, thresholds, and regulations change regularly. Always verify current figures at gov.uk and seek advice from a qualified accountant or solicitor before making decisions about your business structure or tax affairs.
