As exciting as it is to start your business, you need to know how much it will cost to register it. In the UK, the cost of business registration can change based on where you live and how your business is set up. Find out how much it costs to register your business in the UK in this guide. This way, you can plan your budget properly.
Different Types Of Business Structures
Before we get into the details of the cost of business registration, let’s first discuss the different types of business structures you can choose from. The most common types are:
- Sole Trader: This is the simplest and most common type of business structure in the UK. As a sole trader, you and your business are considered one entity, meaning you’re personally liable for any debts or losses your business incurs.
- Partnership: A partnership is a business structure where two or more individuals agree to share the profits or losses of a business. Like sole traders, partners are typically jointly and severally liable for the business’s debts.
- Limited Company: A limited company is a separate legal entity from its owners, meaning the company is responsible for its debts, not the owners. This offers a degree of personal liability protection to the owners (shareholders).
Each structure has its own advantages and disadvantages, and the best choice for you will depend on your specific circumstances. Let’s look at the costs associated with each type of business structure.
Cost Of Business Registration
Here’s a comprehensive breakdown for each business structure to help you plan your budget effectively. For a quick overview, refer to the table below:
| Business Structure | Core Registration Costs | Notes |
| Sole Trader | HMRC Self Assessment: Free | National Insurance registration: FreeTrading name registration: Free |
| Partnership | Basic Partnership: FreeLimited Partnership: £20LLP: £12 (online) | LLP offers limited liability protection Partnership Agreement recommended (£500+) |
| Limited Company | Companies House: £12 (online)£40 (paper)Name Reservation: £8 | Offers personal asset protection. Annual confirmation statement: £13 online Ongoing compliance costs apply |
Sole Trader Registration
The simplest and most cost-effective business structure to set up.
Core Registration Costs:
- HMRC Self Assessment registration: Free
- National Insurance registration: Free
- Trading name registration: Free
Additional Considerations:
- National Insurance contributions:
- Class 2: Flat rate payments (rates updated annually)
- Class 4: Percentage-based on profits (check HMRC for current rates)
- Professional indemnity insurance: Optional but recommended, especially for service-based businesses
- Industry-specific licenses and permits: Costs vary by location and business type (e.g., food handling, alcohol sales)
Example Scenario: Sarah’s Freelance Design Business
- Initial Registration Costs: £0
- First Year Essential Costs:
- Professional indemnity insurance: £300/year
- Basic accounting software: £120/year
- Business bank account: £72/year (£6 monthly)
- Total Basic Setup: £492
Partnership Registration
Similar to sole trader setup but designed for multiple business owners.
Core Registration Costs:
- Basic partnership registration with HMRC: Free
- Limited Partnership registration: £20
- Limited Liability Partnership (LLP): £12 online registration
Essential Setup Costs:
- Partnership agreement: Several hundred pounds (recommended, drafted by a solicitor)
- Individual partner Self Assessment registration: Free
- National Insurance registration for each partner: Free
Additional Considerations:
- Professional indemnity insurance: Recommended for all partners
- Industry-specific licenses: Vary by sector
- National Insurance contributions: Similar to sole trader structure
Example Scenario: Tom & Jack’s Consulting Partnership
- Initial Registration Costs: £12 (LLP registration)
- First Year Essential Costs:
- Partnership agreement: £500
- Professional indemnity insurance: £600/year
- Accounting software: £240/year (2 users)
- Business bank account: £120/year (£10 monthly)
- Legal fees: £800
- Total Basic Setup: £2,272
Limited Company Registration
A more complex structure offering personal asset protection.
Core Registration Costs:
- Companies House registration:
- Standard online registration: £12
- Paper application: £40
- Same-day service: £100
- Name reservation: £8 per name
Ongoing Compliance Costs:
- Annual confirmation statement: £13 online (£40 paper filing)
- Corporation tax: Varies based on profit levels. Profits up to £50,000 are taxed at 19%, profits over £250,000 are taxed at 25%. A marginal rate applies to profits between £50,000 and £250,000.
- Annual accounts filing: Required but no filing fee
Infrastructure Requirements:
- Registered office address: Free if using your business address, or costs vary for third-party services
- PAYE setup: Free but required if employing staff
- Employer’s National Insurance contributions: Required if employing staff
Additional Considerations:
- Professional indemnity insurance: Recommended for service businesses
- Industry-specific licenses and permits: Costs vary
- Business bank account: Usually required (fees vary by provider and may range higher than £25 monthly)
Example Scenario: City Tech Solutions Ltd
- Initial Registration Costs:
- Companies House registration: £12
- Name reservation: £8
- First Year Essential Costs:
- Professional indemnity insurance: £800/year
- Accounting software: £300/year
- Business bank account: £180/year (£15 monthly)
- Accountancy services: £1,200/year
- Annual confirmation statement: £13
- Total Basic Setup: £2,513
Learn about available tax deduction strategies to maximize your company’s tax efficiency.
Choosing the Right Structure
Consider these factors when selecting your business structure:
- Initial setup costs
- Personal liability protection needs
- Tax efficiency
- Growth plans
- Administrative requirements
- Industry regulations
For complex situations, consider consulting with our tax advice team to determine the most suitable structure for your specific circumstances.
Setup Costs And Running Expenses
When planning your business finances, it’s crucial to think about both immediate setup costs and ongoing operational expenses. Here’s a comprehensive overview of what you need to budget for:
Annual Compliance Costs
- Companies House filings:
- Annual confirmation statement: £13 when filed online
- Annual accounts filing: Free when submitted on time
- Updates to company information: Most changes are free to file
- Tax registrations and reporting:
- Corporation tax registration: Free with HMRC
- VAT registration: Free (mandatory when turnover exceeds £90,000)
- Making Tax Digital compliance: Costs vary by software choice
- Self Assessment filing: Free, but may require professional assistance
Professional Services
- Accountancy and bookkeeping services: Essential for maintaining accurate financial records
- Legal fees: Contract reviews, terms of service, and business protection
- Formation assistance: Professional help with registration and compliance
- Business planning support: Strategic development and growth guidance
- Tax registration and compliance support: Meeting regulatory requirements
- Professional indemnity insurance: From £50 monthly
- IT support services for infrastructure maintenance
- Regular system maintenance and updates
Tech Setup
- Website development and hosting: £500-£5000+ initial setup, plus £5-£30 monthly hosting
- Domain registration: £10-£50 annually
- SSL certificate: £20-£100 annually
- Professional email hosting: £5-£15 per user monthly
- Accounting software (e.g., QuickBooks Online): £10-£30 monthly
- Tax calculation software: (TaxCalc or similar) Annual subscription based on needs
- Business management tools: Variable based on requirements
- Customer relationship management (CRM) systems: From £10 per user monthly
- Digital security essentials:
- Antivirus software and security systems
- Data backup solutions
- Privacy and data protection compliance tools
Financial Services
- Business banking fees: £0-£25 monthly (fees can be higher depending on the bank and type of account)
- Payment processing fees: Variable percentage of transactions
- Insurance coverage:
- Professional indemnity insurance
- Public liability insurance
- Contents insurance
- Specific industry coverage as needed
Physical Infrastructure
- Office space rental or purchase: Variable by location and size
- Equipment and supplies: Initial and ongoing costs
- Utilities and communications: Monthly expenses
- Trading licenses: Variable by industry and location
Business Growth
- Marketing and advertising costs: Variable based on strategy
- Branding and design: Initial setup costs
- Networking and business development expenses
- Travel expenses for client meetings
Budget Planning Tips
- Create a comprehensive business plan including all potential costs
- Add a contingency fund of 10-20% for unexpected expenses
- Review and adjust budgets quarterly
- Consider seasonal variations in expenses
- Factor in growth-related costs for future expansion
- Seek professional advice for industry-specific requirements
- Monitor and optimize recurring costs regularly
- Plan for regular maintenance and updates of digital systems
- Schedule annual reviews of service providers and costs
- Consider bulk or annual payment options for potential savings
These costs vary significantly based on your industry, location, and business model. It’s recommended to research industry-specific expenses and consult with professionals to create an accurate budget for your particular situation.
Smart Ways To Save On Registration
Here are some tips for minimizing the costs associated with registering your business:
- Do some of the work yourself: You can save money by doing some of the work yourself, such as registering with HMRC online or filing your own annual confirmation statement.
- Shop around for the best deals: Compare prices from different providers for services such as banking, insurance, and web hosting to ensure you’re getting the best value for your money.
- Take advantage of free resources and support: There are many free resources and support programs available to start-ups, such as government grants, mentoring programs, and free online business advice.
Getting your business registration right from the start sets you up for long-term success. If you need help understanding the costs involved or choosing the right business structure, contact us today. Our experienced team can guide you through the registration process and help you make informed decisions about your business setup.
FAQs
Do I need to register my business with HMRC?
Yes, all businesses must register with HMRC for tax purposes, though the registration itself is free.
When do I need to register for VAT?
You must register for VAT when your annual turnover exceeds £85,000, though you can register voluntarily before reaching this threshold.
How long does business registration take?
Sole trader registration can be completed within 24 hours. Limited company registration typically takes 24-48 hours, or same day with the £100 expedited service.
What insurance do I need when registering a business?
While not mandatory for registration, professional indemnity and public liability insurance are highly recommended for most businesses.
Do I need a business bank account?
Limited companies must have a separate business account. While not mandatory for sole traders, it’s recommended for keeping personal and business finances separate.
Can I change my business structure later?
Yes, you can change your business structure, though this may involve new registration fees and professional assistance to manage the transition properly.
