Setting up a limited company in the UK

Published Wednesday 27 May 2026

Table of contents

• What is a limited company?
• Is a limited company right for you?
• What does it cost to register a limited company?
• Registration methods: online, postal, or using an agent
• How to set up a limited company in 10 steps
• Identity verification requirements
• How long does it take to set up a limited company?
• What are the legal responsibilities of a limited company?
• What to do immediately after registration
• Simplify your limited company finances with Xero
• FAQs on setting up a limited company

Key takeaways

• You can register a limited company online through Companies House for £100, and the process is typically completed within 24 hours.
• You must verify your identity with Companies House under the Economic Crime and Corporate Transparency Act 2023, which has been mandatory since 18 November 2025.
• You must register for Corporation Tax with HMRC within three months of starting to trade, and you'll need to register for VAT if your taxable turnover exceeds £90,000.
• You should keep accurate financial records from day one and retain them for at least six years to meet HMRC requirements.

What is a limited company?

A limited company is a type of business structure that's legally separate from its owners. This guide covers UK limited company registration through Companies House, so all fees, deadlines, and legal references apply specifically to England, Wales, Scotland, and Northern Ireland.

When you form a limited company, your personal liability for business debts is limited to the amount you've invested. This means your personal savings, home, and other assets are protected if the business runs into financial difficulty.

Private limited company (Ltd) vs public limited company (PLC)

Most new businesses register as a private limited company, commonly known as an Ltd. A private limited company can't offer shares to the public and needs just one director to get started.

A public limited company (PLC) can sell shares on the stock market, but it must have at least two directors and a minimum share capital of £50,000. PLCs also face more regulatory requirements. If you're starting a small business, an Ltd is almost certainly the right choice.

Limited by shares vs limited by guarantee

Companies limited by shares are the standard structure for trading businesses. As a shareholder, your liability is limited to the value of your shares, and you can take profits out of the company as dividends after paying Corporation Tax.

Companies limited by guarantee are typically used for non-profit organisations and charities. Instead of shareholders, they have guarantors who agree to contribute a set amount if the company is wound up. The steps in this guide apply to companies limited by shares.

What's the difference between a limited company, a partnership, an LLP, and a sole trader?

Before you commit to a limited company, it's worth understanding how it compares to other business structures.

A sole trader is self-employed and personally responsible for all business debts. There's no legal distinction between you and your business. It's the simplest structure, but it offers no liability protection.

A general partnership is run by two or more people who share profits and responsibility. Like sole traders, partners are personally liable for business debts. The partnership itself isn't a separate legal entity.

A limited liability partnership (LLP) gives partners the benefit of limited liability. Each partner's responsibility for debts is limited to what they've invested, and profit shares are set out in an LLP agreement. Partners pay tax individually on their share of income as if they were self-employed.

Is a limited company right for you?

Choosing the right business structure depends on your circumstances. Here's what to consider before you decide whether a limited company is the best fit.

Why set up a limited company?

A limited company offers several advantages over operating as a sole trader or partnership.

• Limited liability protection: your personal assets are separate from the business, so they're protected if things go wrong.
• Potential tax efficiency: Corporation Tax rates can be lower than personal income tax rates, which may save you money as your profits grow.
• Professional credibility: a registered company name is legally protected, and many clients and suppliers prefer working with limited companies.
• Access to funding: you can sell shares to investors and access finance options that aren't available to sole traders.
• Employee incentives: you can offer shares to staff, which can help with recruitment and retention.

These benefits come with added responsibilities. You'll need to file annual accounts with Companies House and submit Corporation Tax returns to HMRC. Talk to an accountant to weigh up whether the advantages outweigh the extra admin for your situation.

When should you switch from sole trader to limited company?

There's no single threshold that triggers the switch, but several situations make it worth considering. Many sole traders consider incorporating when their profits consistently exceed the higher-rate income tax band or when they want to limit personal liability. Larger clients may also require you to operate as a limited company before working with you.

If you're thinking about hiring employees or seeking outside investment, a limited company structure makes those steps much easier. Speak to an accountant to assess whether switching from sole trader to limited company is right for your specific circumstances.

Can I set up a limited company on my own?

Yes. A single person can act as both the sole director and the sole shareholder of a UK limited company. This is a common structure for freelancers, contractors, and independent business owners. You don't need a company secretary, although you can appoint one if you choose.

What does it cost to register a limited company?

The cost of registering a limited company depends on which method you choose. Companies House sets the fees, and they were last updated on 1 February 2026.

• Online registration via Companies House WebFiling: £100 (cheapest and fastest option).
• Postal registration: £124.
• Same-day guaranteed registration (digital filing via software only): £156.

Check the latest fees on the Companies House website as they may change. If you use a formation agent or accountant to handle your registration, their service fees will be on top of the Companies House filing fee.

Registration methods: online, postal, or using an agent

When you're ready to register your company, you have three options. Each has its own advantages depending on how much support you need.

Register online with Companies House

This is the fastest and most common method. The online service guides you through each step, and your company can be registered within 24 hours. You'll pay £100.

Register by post

If you prefer a paper-based approach, you can download and complete form IN01. Post it to Companies House along with your memorandum of association and the £124 fee. Processing typically takes eight to 10 working days.

Use a company formation agent

Formation agents are third-party services that handle the entire registration process for you. They can also provide extras like a registered office address, help you choose the right company structure, and ensure your application is complete before it's submitted. Fees vary, but expect to pay the agent's service charge on top of the Companies House filing fee. Many accountants also offer incorporation as part of their onboarding service.

How to set up a limited company in 10 steps

Setting up a limited company involves 10 key steps. You can complete most of them online in a single sitting.

Step 1: choose a company name

Your company name is the registered name that appears on all official documents and at Companies House. Follow these requirements when choosing it.

• Check availability using the Companies House name checker.
• Search for existing trade marks to avoid conflicts.
• End your name with "Ltd" or "Limited."
• Avoid names that are too similar to existing companies or that suggest a connection to government.

Your registered company name doesn't have to be the same as your trading name. A trading name is the name your customers see, and you can trade under a different name as long as your registered name appears on all official correspondence, invoices, and contracts. For tips on finding the right name, read Xero's guide on how to come up with a business name.

Step 2: choose a registered office address

Every limited company must have a registered office address. This is the official address listed at Companies House, and it's where all statutory correspondence is sent. It must be a physical address in the same part of the UK where your company is registered (England and Wales, Scotland, or Northern Ireland).

You can use your home address, your accountant's address, or a registered office service provider. Keep in mind that your registered office address is publicly visible on the Companies House register, so many directors prefer not to use their home address.

Step 3: appoint directors

Your company must have at least one director. Directors are legally responsible for running the company and maintaining accurate records. They must also file annual accounts and submit tax returns on time. They must fulfil seven statutory duties under the Companies Act 2006, including acting within their powers and promoting the success of the company for its members.

You don't need a company secretary, but you can appoint one to help manage the administrative workload.

Step 4: decide on shareholders and share structure

You need at least one shareholder to set up a limited company, and this can simply be you as the director. If you have more than one shareholder, your registration must state how many shares each person holds and what those shares are worth.

You'll also need to set out each shareholder's rights: whether they receive dividends, whether they can transfer their shares, and how many votes they get on company matters. These details are known as prescribed particulars.

Step 5: identify persons with significant control (PSCs)

You must tell Companies House about anyone who has significant control over your company. A person with significant control (PSC) is someone who holds more than 25% of shares or more than 25% of voting rights, or who has the right to appoint or remove a majority of the board of directors. Meeting any one of these conditions is enough to qualify as a PSC.

If you're a sole director and sole shareholder, you'll be the PSC. Read the full PSC guidance on GOV.UK for more detail.

Step 6: choose your SIC code

A Standard Industrial Classification (SIC) code tells Companies House what your business does. You'll need to choose at least one code during registration.

Use the Companies House SIC code list to find the code that best matches your primary business activity. If your company does more than one thing, you can select multiple codes. Pick the closest match; you can update your SIC code later if your business activities change.

Step 7: prepare your memorandum and articles of association

You'll need two key documents to register your company. The memorandum of association is a legal statement signed by all initial shareholders confirming they agree to form the company. If you register online, this is created automatically.

The articles of association are the rules for running your company. They cover how decisions are made, how shares are issued, and what happens if a director or shareholder leaves. You can write your own or use the standard model articles provided by the government.

Step 8: organise your accounts structure

Good record-keeping from day one makes running your company much easier. Set up systems to track your income, expenses, invoices, and receipts before you start trading.

You're legally required to keep company and accounting records from the moment you start trading. Consider appointing an accountant or bookkeeper to help you stay organised from day one.

Step 9: register with Companies House

Once you've prepared everything, you're ready to register. You can do this online through Companies House WebFiling for £100, or by posting form IN01 with a £124 fee.

Provide your company name, registered office address, director and shareholder details, PSC information, SIC code, memorandum and articles of association, and a statement of capital.

Step 10: register for taxes

After your company is incorporated at Companies House, you need to register for taxes with HMRC. These are separate processes.

• Corporation Tax: you must register for Corporation Tax within three months of starting to trade or carrying out any business activity. Read Xero's guide on what Corporation Tax is for a full overview of rates and deadlines.
• PAYE: if you're paying yourself a salary or taking on employees, you'll need to register as an employer with HMRC.
• VAT: you must register for VAT if your taxable turnover exceeds £90,000 in any rolling 12-month period. You can also register voluntarily below that threshold, which may be beneficial if most of your customers are VAT-registered businesses. Learn more about choosing a VAT accounting scheme.

If you're VAT-registered, you must keep digital records and submit VAT returns through Making Tax Digital (MTD) compatible software.

Identity verification requirements

Since 18 November 2025, identity verification has been mandatory for all company directors, persons with significant control, and anyone filing on behalf of a company at Companies House.

This requirement was introduced under the Economic Crime and Corporate Transparency Act 2023 to increase transparency and combat fraud. You can verify your identity through the Companies House online identity verification service or through an Authorised Corporate Service Provider (ACSP), such as an accountant or solicitor.

If you're registering a new company, you'll need to complete identity verification as part of the process. Existing directors and PSCs of companies already on the register also need to verify their identity.

How long does it take to set up a limited company?

The time it takes to register depends on your chosen method.

• Online registration: usually completed within 24 hours.
• Postal registration using form IN01: typically takes eight to 10 working days.

Online registration is both faster and cheaper. If you'd like help with the process, consider working with a qualified accountant or bookkeeper.

What are the legal responsibilities of a limited company?

Running a limited company comes with ongoing legal obligations. Understanding these from the start helps you avoid penalties and stay compliant.

Director duties under the Companies Act

The Companies Act 2006 sets out seven statutory duties that every director must follow. In plain terms, you must act within your powers as set out in the company's articles and promote the success of the company for its members. You also need to exercise independent judgement and use reasonable care and diligence in your role.

You must also avoid conflicts of interest and not accept benefits from third parties that could compromise your judgement. You're required to declare any personal interest in proposed transactions or arrangements with the company.

Statutory records you must keep

Every limited company must maintain certain statutory records and make them available for inspection. These include a register of members (shareholders), a register of directors, a register of persons with significant control, minutes of board meetings, copies of resolutions, and accounting records covering all income and expenditure.

These records must be kept at your registered office or at a single alternative inspection location (SAIL) address. HMRC requires you to retain financial records for at least six years from the end of the financial year they relate to.

Ongoing filing obligations

You'll need to file several documents on a regular basis to stay compliant.

• Annual accounts: private companies must file these with Companies House within nine months of the company's accounting reference date. The accounting reference date is automatically set to the last day of the month in which your incorporation anniversary falls.
• Confirmation statement: this is due every year, and you must file it within 14 days of the anniversary of your company's incorporation.
• Corporation Tax return (CT600): this must be filed with HMRC within 12 months of the end of your company's accounting period.

Missing these deadlines can result in automatic penalties, so it's worth setting reminders as soon as your company is registered.

Cash flow is another pressure point for new directors. According to the Xero Small Business Insights, UK small businesses wait an average of 29.0 days to be paid, with invoices running 8.2 days overdue. Setting up clear payment terms and tracking invoices from day one can help you stay on top of your finances.

What to do immediately after registration

Once your company is registered at Companies House, there are several things you should do straight away to get your business running smoothly.

• Complete your Corporation Tax and PAYE registrations, plus VAT if applicable, as covered in Step 10 above.
• Open a business bank account to keep your personal and company finances separate. Your limited company is a separate legal entity, so mixing funds can cause legal and tax complications.
• Set up pension auto-enrolment if you have eligible employees. As a new employer, you must assess your workforce and enrol eligible staff into a qualifying pension scheme. Visit The Pensions Regulator for guidance.
• Mark your accounting reference date and Confirmation Statement anniversary in your calendar so you don't miss the nine-month accounts deadline or the 14-day filing window.
• Consider appointing an accountant or bookkeeper if you haven't already.
• Choose accounting software so your records are accurate from day one, helping you avoid problems down the line.

Simplify your limited company finances with Xero

Setting up a limited company is an exciting step, but staying on top of your finances doesn't have to be complicated. Xero's cloud accounting software connects to your bank to automatically import and categorise transactions, so you always have a clear picture of your cash flow.

You can send professional invoices, track VAT, prepare for Making Tax Digital, and collaborate with your accountant or bookkeeper in real time. Everything is accessible from your phone or laptop, so you can manage your company finances wherever you are.

Ready to take the stress out of your bookkeeping? Try Xero for your new limited company and get one month free.

FAQs on setting up a limited company

Here are some frequently asked questions about setting up a limited company.

How much does it cost to run a limited company each year?

Beyond the initial registration fee, you'll pay for annual accounts preparation, Corporation Tax filing, and potentially an accountant's fees. The Confirmation Statement filing costs £34 per year, and you may also need to budget for VAT returns and payroll processing.

When should I switch from being a sole trader to a limited company?

The switching process involves registering a new company, transferring contracts and assets, and informing HMRC that you're ceasing self-employment. Many sole traders trigger this when annual profits regularly exceed the £50,270 higher-rate income tax threshold, at which point Corporation Tax rates may save you money.

Do I need to register for VAT when I set up a limited company?

VAT registration is a separate process from company formation, and it isn't automatic when you incorporate. If you do register, you'll need Making Tax Digital (MTD) compatible software to file quarterly VAT returns digitally.

What happens if I make a mistake during registration?

If Companies House finds an error, you'll need to resubmit your application or file correction forms, so check your details carefully before submitting.

Do I need an accountant to set up a limited company?

You don't need an accountant to register a limited company, but their advice can be valuable. An accountant can help you choose the right business structure, set up your accounts correctly, and understand your ongoing tax and filing obligations.

Can I change my company name after registration?

Yes, you can change your company name by passing a special resolution (agreed by at least 75% of shareholders) and filing the change with Companies House for a fee.