How to set up a limited company (UK)

Quick summary: a private limited company (Ltd) is a separate legal entity.
That means the company, not you personally, legally owns the business.
It’s a common choice when you want limited liability, a more professional structure, or tax flexibility but it brings extra admin and compliance compared with being a sole trader.
See below for how to set one up, typical costs, when to incorporate, and useful links.

Step-by-step: how to register a limited company

Choose a company name
Check it’s not already taken and it follows Companies House rules.
Decide the company details you’ll file:
At least one director (and their personal details).
A registered office address (this is public).
Share structure (e.g. 1 share owned by you) and initial shareholders.
Standard Industrial Classification (SIC) code for your business activity.
Persons of Significant Control (PSC) details if someone ultimately controls the company.
Prepare the company constitution
Usually the model Memorandum & Articles of Association (Companies House supplies standard versions).
Incorporate (file with Companies House)
Submit your application online (fast) or by post. When accepted, Companies House issues a certificate of incorporation (your company’s official “birth certificate”).  
Register for Corporation Tax with HMRC
You must register within 3 months of starting to trade; HMRC will send a UTR (Unique Taxpayer Reference).
Set up company records & register for PAYE if you employ staff
Keep statutory registers, minutes, and accounting records; register as an employer with HMRC before the first payday if you hire staff.  

How much it costs (realistic picture)

Companies House filing fee (official)
The standard online incorporation fee is £50 (paper fees are higher).
There are also same-day or other digital fees for faster services. Check Companies House for the exact current fees.  
Formation agent packages
Using a company-formation service typically costs extra (packages from about £50–£100 upwards depending on extras like VAT registration help, bank introductions, or boilerplate documents). These agents usually include the Companies House fee in their price.  
Accountancy & bookkeeping
Ongoing costs vary widely depending on how much help you need. Small limited companies commonly pay from a few hundred to a few thousand pounds a year for accountancy services (monthly bookkeeping + year-end accounts + corporation tax return).
Get quotes as prices depend on turnover, payroll, VAT complexity, and whether you want full outsourcing.  
Optional extras
Business bank account (often free but check fees), payroll software, VAT accounting software, and any professional indemnity / insurance premiums. Formation agents or accountants may charge for extras like certificate packs, company seals or registered office services.
Tip: budget for at least the Companies House fee and an accountant quote for the first year and compare 2–3 accountants before committing.

When should you form a limited company (vs staying a sole trader)?

You might choose to incorporate if any of the following apply:
You want limited liability (separates your personal assets from the company’s).
You expect higher profits and wish to take advantage of tax-efficient ways to extract income (salary/dividends) often worthwhile when profits exceed what’s practical as a sole trader (this depends on personal tax circumstances).
You want a more professional image or need a company for client contracts.
You plan to hire staff, take external investment, or sell the business in the future.
You’re being asked by clients to operate via a limited company (some contractors/clients prefer this).  
If your business is small with simple income, remaining a sole trader may be simpler. Sole traders register with HMRC for Self Assessment and have fewer formal filing obligations.
Use a comparison (sole trader vs limited company) and consider an accountant if unsure. 

Official sites you will need to visit

Companies House Incorporate and file annual documents (confirmation statements, accounts).
GOV.UK / HMRC Register the new company for Corporation Tax, register for PAYE if you employ, register for VAT if turnover exceeds the VAT threshold.  
Business bank account pages Many banks offer dedicated business accounts and sign-up pages (Barclays, HSBC, Tide, Starling, etc.).
(You can compare providers on business banking comparison sites.)
Trusted formation agents / accountants Optional, but popular for a hands-on setup (they often bundle services like registered office, digital documents, and bank referrals).  

Insurance you should consider (depend on activity)

Insurance is often essential
The right policies protect you from claims and regulatory obligations:
Employers’ Liability Insurance Required as soon as you take on employees; minimum cover usually £5 million.
Public Liability Insurance Covers injury or damage to third parties (recommended for most businesses that meet the public).
Professional Indemnity Insurance Important if you give professional advice, design, or consultancy (covers mistakes and negligence claims).
Contents / Business Interruption / Product Liability / Cyber Insurance Consider depending on your sector (retail, online services, product sales, etc.).  
Tip: List your likely risks, call 2–3 insurance brokers for quotes, and keep proof of cover for clients and tender bids

Other taxes & compliance you’ll need to know (short checklist)

Corporation Tax Company pays corporation tax on profits (register with HMRC after incorporation).
VAT Register if taxable turnover passes the threshold (currently £90,000 for the rolling 12-month period; check GOV.UK for current levels).
PAYE & National Insurance If you pay salaries; register as an employer with HMRC.
Annual accounts & confirmation statement File with Companies House each year.

Practical tips & common pitfalls

Pick a sensible company name (avoid trademarks and sensitive words). Check the Companies House name checker before you commit.
Keep personal and business money separate Open a business bank account early to simplify accounting and protect limited liability.
Budget for professional help An accountant can save time and often money (missed filings can lead to penalties).
Shop around for fixed-price packages.
Be ready for identity verification changes Companies House is progressively rolling out ID checks for new directors and PSCs (follow Companies House updates).  
Recordkeeping Good bookkeeping from day one saves stress at year-end and helps with VAT/PAYE obligations. Consider cloud accounting software (Xero, QuickBooks, FreeAgent).  

Quick “Start Checklist”

Chose company name & check availability.
Decide directors, shareholder(s) & PSCs.
Choose registered office & SIC code.
Prepare Articles of Association (use model articles if appropriate).
Incorporate at Companies House (online).  
Register company with HMRC for Corporation Tax.  
Open a business bank account.
Arrange business insurance (at least public liability; employers’ liability if you hire).  
Get bookkeeping / accounting set up (software or accountant).  

Where to get help (links to trusted places)

Companies House for company formation & guidance.  
GOV.UK to set up business & register for taxes (HMRC).  
British Business Bank for business basics & insurance guidance.  
Compare accountants and formation agents and get several quotes and check reviews/credentials.  

disclaimer

This page is for general information only and does not constitute legal, tax or financial advice. Rules, fees and thresholds change
Always check the official Companies House and GOV.UK guidance and consider speaking to a qualified accountant or solicitor for personalised advice.