Starting a business checklist for the UK: key steps

Published Wednesday 25 March 2026

Table of contents

• Research your business idea and market
• Create a business plan
• Secure funding for your business
• Choose your business name and protect it
• Set up your business structure
• Set up a business bank account
• Arrange business insurance
• Register for taxes
• Check your business will be profitable
• Set up your technology and tools
• Plan for hiring employees
• Take the next step in your business journey
• FAQs on starting a business in the UK

Key takeaways

• Validate your business idea through market research by identifying target customers, analysing competitors, and testing your concept with potential buyers before investing significant time and money.
• Set up proper financial systems early by opening a business bank account, choosing cloud-based accounting software, and registering for all required taxes to maintain clear records from day one.
• Complete essential legal requirements including business registration, obtaining necessary licences and permits, and arranging appropriate insurance coverage to operate legally and protect your business.
• Create a comprehensive business plan that documents your concept, target market, financial projections, and funding requirements to guide your decisions and attract potential investors or lenders.

Research your business idea and market

Market research confirms whether enough people want what you're planning to sell and helps you understand who your competitors are. Skipping this step risks investing time and money in a business that doesn't have a viable market.

Before committing to your business idea:

• identify your target customers and understand their needs
• research competitors and analyse what they do well and where they fall short
• test your concept with potential customers through conversations or surveys
• validate that people will pay the price you need to charge
• assess the size of your potential market

Talk to people in your target market. Their feedback will help you refine your idea and spot problems before they become expensive mistakes.

A unique selling point (USP) defines what makes your business different from competitors. Sum it up in two sentences and memorise it. You'll use it every time you pitch to investors and potential customers.

Find a business mentor

A business mentor provides honest feedback and guidance as you navigate startup decisions. Having an experienced advisor helps you avoid common mistakes and stay focused when challenges arise.

Find a mentor through:

• small business associations in your area
• small business development centres
• industry networking events
• accountants or bookkeepers who work with startups

Create a business plan

A business plan documents your business concept, target market, financial projections, and growth strategy. It summarises where your business is now and maps where you want it to go.

Your plan should cover:

• your products or services and who they're for
• how you'll reach customers and generate revenue
• startup costs and funding requirements
• financial forecasts for the first one to three years

Need help getting started? Use the free business plan template.

Secure funding for your business

Startup funding covers the costs of launching your business before revenue starts coming in. Understanding your funding options helps you choose the right approach for your situation and growth plans.

Common funding sources for UK startups include:

• Personal savings: Keeps you in full control but puts your own money at risk.
• Start Up Loans: Government-backed loans of £500 to £25,000 with free mentoring.
• Small business grants: Free money that doesn't need repaying, though competition is high.
• Bank loans and overdrafts: Traditional financing that requires a solid business plan.
• Friends and family: Informal investment, but put agreements in writing.
• Angel investors or crowdfunding: Suitable for businesses with high growth potential.

Calculate your startup costs and working capital needs before approaching lenders. Most will want to see a business plan with realistic financial projections.

Choose your business name and protect it

Your business name shapes how customers perceive and find you. Choose a name that's memorable, easy to spell, and available across the platforms you need.

Before committing to a name:

• check availability at Companies House
• search for existing trademarks on the Intellectual Property Office website
• confirm the domain name is available
• verify the name works on social media platforms

Register your domain name early, even if you're not ready to build your website yet. Consider trademark protection if your name is central to your brand identity.

Set up your business structure

Your business structure determines how you pay taxes, your personal liability, and how much admin you'll handle. The right choice depends on your circumstances and growth plans.

The main options in the UK are:

• Sole trader: Simplest to set up with minimal paperwork, but you're personally liable for business debts. For regulated loans, a recent Financial Conduct Authority (FCA) review found that only 0.3% required a personal guarantee (PG).
• Partnership: Share ownership and responsibilities with one or more partners.
• Limited company: Separate legal entity that protects your personal assets, but requires more admin and public filings. For instance, under new rules, small companies can no longer file abridged accounts and must instead submit their profit and loss account and a directors' report.

An accountant can help you weigh the tax implications and choose the structure that fits your situation.

Register your business

Business registration makes your company official and ensures you're legally allowed to trade. The registrations you need depend on your chosen business structure.

To register your business:

1. Sole traders: Register as self-employed with HM Revenue and Customs (HMRC) before 5 October in your business's second tax year.
2. Limited companies: Register with Companies House, which can be done online in about 24 hours for £50.
3. Partnerships: Register the partnership with HMRC and each partner registers individually for Self Assessment.
4. Business name: If trading under a name different from your own or company name, include your legal name and address on business documents.

You'll receive a Unique Taxpayer Reference (UTR) from HMRC after registering. Keep this safe as you'll need it for tax returns and some business applications.

Get the right licences and permits

Business licences and permits are legal requirements that vary by industry and location. Operating without required licences can result in fines or forced closure.

Check whether your business needs:

• Industry-specific licences: Required for food businesses, alcohol sales, financial services, childcare, and many other sectors.
• Local council permits: May be needed for street trading, outdoor seating, or certain business premises.
• Professional certifications: Required or expected in fields like accounting, law, healthcare, and construction trades.
• Data protection registration: Register with the Information Commissioner's Office (ICO) if you handle personal data.

Use the licence finder on GOV.UK to check which licences apply to your business type and location. Some licences take weeks to process, so apply early.

Set up a business bank account

A business bank account keeps your personal and business finances separate. This makes bookkeeping simpler, tax reporting clearer, and protects your personal money if something goes wrong.

Open a business account before you start trading. When choosing a bank, consider:

• monthly fees and transaction charges
• integration with accounting software
• online and mobile banking features
• access to business credit or overdrafts

A business credit card and payment platform like PayPal can also help you manage cash flow and accept customer payments.

Choose your accounting software

Accounting software automates your bookkeeping, tracks income and expenses, and keeps your financial records organised. Setting this up early prevents messy records and is crucial as the UK undergoes a transition to software-only filing over the next few years.

Choose cloud-based accounting software that:

• connects to your bank for automatic transaction imports
• sends invoices and tracks payments
• captures receipts and categorises expenses
• generates financial reports and tax summaries
• integrates with other business tools you use

Cloud-based software like Xero lets you access your finances from anywhere and share information easily with your accountant. With over 1,000 connected apps, you can build a system that fits exactly how your business works.

Arrange business insurance

Business insurance protects you from financial losses caused by accidents, lawsuits, or unexpected events. Even small businesses need cover, and some types are legally required.

Common types of business insurance include:

• Public liability insurance: Covers claims if a customer or member of the public is injured or their property is damaged.
• Professional indemnity insurance: Protects against claims of negligence or mistakes in your professional advice or services.
• Employers' liability insurance: Legally required if you have employees.
• Contents and equipment insurance: Covers your business property against theft or damage.

Talk to an insurance broker to find the right package for your business type and risk level.

Register for taxes

Tax registration is a legal requirement that must be completed before you start trading. The registrations you need depend on your business structure and expected turnover.

To register for taxes:

1. Register as self-employed with HMRC if you're a sole trader, or register your limited company with Companies House.
2. Get your Unique Taxpayer Reference (UTR) number from HMRC.
3. Register for value added tax (VAT) if your taxable turnover exceeds £90,000 (or voluntarily if it benefits your business).
4. Set up for Pay As You Earn (PAYE) if you plan to employ staff.
5. Register for Corporation Tax within three months of starting to trade (limited companies only).

Complete these registrations early to avoid penalties and ensure you're set up correctly from day one.

Understand tax deductible expenses

Tax deductible expenses are business costs you can subtract from your revenue before calculating tax. Tracking these properly reduces your tax bill and keeps more money in your business.

Common deductible expenses include:

• office rent and utilities
• equipment, software, and technology
• marketing and advertising costs
• professional fees (accountants, lawyers)
• travel and vehicle expenses for business purposes
• stock and materials
• insurance premiums

Keep receipts and records for all business expenses. Accounting software makes this easier by letting you capture receipts digitally and categorise expenses automatically. Talk to your accountant about which expenses apply to your specific situation.

Check your business will be profitable

Profitability forecasting shows whether your business idea can generate enough revenue to cover costs and pay you a reasonable income. Testing this before you launch helps you avoid investing time and money in a venture that won't work financially.

To check your business will be profitable:

• calculate your startup costs and ongoing expenses
• estimate realistic revenue based on your pricing and target market
• run profit and loss forecasts using accounting software
• identify your break-even point
• ask an accountant or financial advisor to review your numbers

Need help estimating costs? Review the guide to startup business costs.

Set up your technology and tools

Business technology helps you work efficiently and stay organised from day one. The right tools save time on admin and let you focus on serving customers and growing your business.

Essential technology decisions include:

• Hardware: Laptops, tablets, or smartphones based on how and where you work.
• Accounting software: Cloud-based systems that automate bookkeeping, invoicing, and bank reconciliation.
• Communication tools: Email, video conferencing, and messaging for team and client communication.
• Industry-specific software: Customer relationship management (CRM) systems, booking platforms, or inventory management depending on your business type.
• Cloud storage: Secure backup and file sharing with services like Google Drive or Dropbox.

Choose tools that integrate with each other, especially your accounting software. This reduces manual data entry and keeps your financial information accurate.

Keep your data safe by using cloud-based software with automatic backups, enabling two-factor authentication, and keeping software updated.

Create your website

A business website establishes your credibility and gives customers a place to learn about your products or services. Even a simple site helps people find you and builds trust before they buy.

Website builders make it easy to get online without technical skills:

• Squarespace: Clean templates with built-in e-commerce.
• WordPress: Flexible and widely used, with thousands of plugins.
• Wix: Drag-and-drop builder with affordable plans.
• Shopify: Best for businesses focused on selling products online.

Start with a simple site that clearly explains what you offer and how to contact you. You can add features and improve the design as your business grows.

Set up your marketing and online presence

Marketing and online presence help potential customers discover your business and understand what you offer. Setting up your marketing channels before launch means you're ready to attract customers from day one.

Focus on the channels that reach your target audience:

• LinkedIn: Essential for business-to-business (B2B) services and professional networking.
• Instagram: Strong for visual businesses like retail, food, or creative services.
• Facebook: Useful for local businesses and community engagement.
• Google Business Profile: Critical for local search visibility.

Start building your audience early by:

• creating business profiles on your chosen platforms
• sharing valuable content that showcases your expertise
• asking friends, family, and early supporters to follow and share your pages
• building an email list to stay in touch with interested prospects

You don't need to be everywhere. Pick two or three channels and do them well.

Plan for hiring employees

Hiring employees lets you grow beyond what you can do alone, but it adds cost and complexity. Before you hire, make sure you have enough consistent work and revenue to support a new team member.

When you're ready to hire:

• identify the role that will add the most value to your business
• calculate the full cost including salary, National Insurance, pension contributions, and training
• understand your legal obligations as an employer
• set up payroll systems before your first employee starts
• write a clear job description and plan your interview process

For detailed guidance, see the guide to hiring employees.

Take the next step in your business journey

Starting a business involves many moving parts, but you don't have to tackle everything at once. Focus on getting the fundamentals right: validate your idea, set up your legal structure, and establish proper financial systems. Build from there as your business grows.

The sooner you set up proper accounting, the easier everything else becomes. You'll have clear visibility into your cash flow, simpler tax reporting, and more time to focus on your customers.

With Xero's cloud-based accounting software, you can manage invoices, track expenses, and stay on top of your finances from day one. Get one month free and see how Xero makes running your business easier.

For more detailed guidance on each phase of starting your business, check out the complete guide to starting a business.

FAQs on starting a business in the UK

Starting a business raises many questions. Here are answers to some of the most common concerns from new business owners.

How long does it take to start a business in the UK?

Basic business registration takes one to two weeks. Registering as a sole trader with HMRC is immediate, while limited company registration through Companies House typically completes within 24 hours online. However, getting everything in place, including bank accounts, insurance, and any required licences, usually takes two to four weeks.

Can I start a business with no money?

Yes, many service-based businesses can launch with minimal upfront costs. Focus on businesses where you sell your skills or time rather than physical products. Government-backed Start Up Loans offer funding from £500 to £25,000 with no early repayment fees, and some grants are available for specific industries or locations.

Do I need an accountant to start a business?

An accountant isn't legally required, but working with one from the start helps you choose the right business structure, set up proper financial systems, and avoid costly tax mistakes. Many accountants offer startup packages or pay-as-you-go advice. Find an advisor through the Xero Advisor Directory.

What's the difference between a sole trader and a limited company?

A sole trader is the simplest structure with minimal paperwork, but you're personally liable for all business debts. A limited company is a separate legal entity that protects your personal assets, but requires more admin including annual filings with Companies House. Limited companies often pay less tax at higher profit levels, but have stricter record-keeping requirements; for example, even micro-entities must now file their profit and loss account.

Can I start a business while working full-time?

Yes, but check your employment contract first. Some contracts include clauses about outside business activities or competing interests. You'll need to manage your time carefully and ensure your side business doesn't affect your job performance. Many successful businesses start as side projects before the owner transitions to full-time.