Step by step
The limited company setup journey
Everything a new UK company director has to do, in the order it actually happens. Each step links to a full guide, and to the calculator that shows the numbers for that decision.
Rates, thresholds and deadlines quoted here reflect the 2026/27 UK tax year. Check current GOV.UK guidance, or ask us, before relying on them for your own company.
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QuickBooks PartnerCertified ProAdvisor100+ yearsCombined team experienceFully insuredUp to £2m indemnity1. Incorporate the company properly
Name, address, share structure and identity verification. Getting these right at the start avoids Companies House rejections and later restructuring.
Choosing a company name: legal rules, sensitive words and trade mark checks
A UK company name must not be the same as, or too like, an existing registered name, must not be offensive, and must not use a sensitive or restricted word without approval. Companies House does not check trade marks, so a name can be accepted at incorporation and still infringe someone else's registered mark. Search the register, the trade mark database and the domain before you file.
Limited company guideRegistered office rules and the registered email address requirement
Every UK company must keep a registered office that is an appropriate address, meaning post delivered there comes to the attention of someone acting for the company and delivery can be acknowledged. PO boxes are not acceptable. Companies must also maintain a registered email address, which Companies House uses for official contact and does not publish on the register.
Limited company guideSIC codes explained: how to pick the right one for your company
A SIC code is a five-digit Standard Industrial Classification code describing what your company does. You give at least one on incorporation and confirm it on every confirmation statement, and you can hold up to four. It has no direct tax effect, but banks, insurers, lenders and credit agencies read it, so a vague or wrong code causes friction.
Limited company guideCompanies House identity verification: what directors and PSCs must do
Every director, person with significant control and anyone filing on a company's behalf must verify their identity with Companies House. You can verify directly through GOV.UK One Login, through an authorised corporate service provider such as an accountant, or on paper where digital routes are impossible. Verification is once per person, not once per company, and it produces a personal code that is reused for every appointment you hold.
Limited company guideShare structure for startups: ordinary shares, alphabet shares and founder splits
Most UK startups should incorporate with a single class of ordinary shares at a low nominal value, split between founders in proportions that reflect long-term contribution, with vesting agreed in writing. Alphabet shares suit owner-managed companies wanting flexible dividends, but they complicate investment rounds and can attract settlements legislation scrutiny where shares go to a spouse.
Limited company guideArticles of association: when model articles are not enough
Model articles are the default constitution supplied by law and they are adequate for a straightforward single-class, single or joint-owner company. They become inadequate as soon as you have multiple share classes, want directors to be able to refuse a share transfer, need weighted voting, or take outside investment. Articles are amended by special resolution and filed at Companies House within 15 days.
Limited company guideDo you need a shareholders' agreement? What to include
Any company with more than one shareholder should have a shareholders' agreement. The articles set out the company's constitution and are public; the agreement is a private contract between shareholders covering vesting, decision-making, share transfers, deadlock and exit. Without one, a 50:50 company in dispute has almost no route forward short of litigation.
2. Register for the right taxes
Corporation tax, VAT and PAYE registrations, plus the decision on whether to register for VAT before you have to.
Registering for corporation tax and getting your company UTR
HMRC posts a company Unique Taxpayer Reference to the registered office within about two weeks of incorporation. You must then tell HMRC the date the company started trading, within three months of that date, which registers it for corporation tax and sets the first accounting period. If the UTR letter never arrived, you can request it online using the company name and number.
Limited company guideFlat Rate Scheme vs standard VAT for new companies
Under the Flat Rate Scheme you charge VAT at 20% as normal but pay HMRC a fixed percentage of your VAT-inclusive turnover and cannot reclaim input VAT except on capital assets over £2,000. Since the limited cost trader rule, most service businesses with low goods spend pay 16.5%, which leaves little or no benefit, so standard VAT accounting is usually better for anyone with real input VAT.
Limited company guideIR35 for contractors trading through a limited company
IR35 asks whether you would be an employee of the client if the company between you did not exist. For medium and large private sector clients and all public sector clients, the client decides status and issues a Status Determination Statement, and the fee payer operates PAYE on the deemed payment. Where the end client is a small company, the contractor's own company remains responsible for deciding and applying the original IR35 rules.
Limited company guidePeople with significant control (PSC) register explained
A person with significant control is anyone who holds more than 25% of shares or voting rights, can appoint or remove a majority of the board, or otherwise exercises significant influence or control over the company. Every company must keep a PSC register, cannot leave it empty, must file PSC information at Companies House and must report changes within 14 days of entering them in the register.
3. Decide how you take money out
Salary, dividends and pension contributions, done in the right order and documented so HMRC and Companies House both accept it.
Dividend tax after the April 2026 rate rise: what directors now pay
From 6 April 2026 the dividend ordinary rate is 10.75% and the dividend upper rate is 35.75%, each two percentage points higher than 2025/26. The additional rate stays at 39.35%. The dividend allowance remains £500, and dividends are treated as the top slice of your income, so the rate depends on where they fall against your other income.
Limited company guideUsing the dividend allowance and personal allowance efficiently
For 2026/27 the personal allowance is £12,570 and the dividend allowance is £500. Dividends are the top slice of income, so the personal allowance is normally set against salary first. The dividend allowance is taxed at 0% but still consumes band. Above £100,000 of adjusted net income the personal allowance tapers away at £1 for every £2, creating an effective 60% marginal band up to £125,140.
Limited company guideHow to declare dividends properly: board minutes and vouchers
A dividend is legal only if the company has distributable profits, the directors decide to pay it, and it is documented. For each distribution keep a board minute recording the reserves check and the decision, and issue a dividend voucher to each shareholder showing the company, the date, the shareholder, the shareholding and the amount. Without that paperwork HMRC can recharacterise the payment as salary or as a director's loan.
Limited company guideIllegal dividends: what happens if you pay without profits
A dividend paid when the company has insufficient distributable reserves is unlawful. The shareholder can be required to repay it if they knew or ought to have known, directors can be personally liable for the shortfall, and HMRC will usually treat the payment as a director's loan, triggering section 455 tax at 35.75% and a benefit-in-kind charge on any interest-free balance above £10,000.
Limited company guideEmployer pension contributions: the most tax-efficient extraction route
An employer pension contribution is deductible against corporation tax, carries no income tax, no employee National Insurance and no employer National Insurance, so it is normally the cheapest way to move money out of a company for a director who does not need the cash now. The annual allowance is £60,000 including all contributions, with unused allowance from the three previous tax years available by carry forward.
Limited company guideShould a sole director company claim the Employment Allowance?
A company whose only employee paid above the secondary threshold is a single director cannot claim the Employment Allowance. Where there is a second employee earning above the threshold, the company can claim, and the allowance is worth up to £10,500 against the employer National Insurance bill for 2026/27. Claiming when you are not eligible leads to a repayment demand plus interest.
Limited company guideCan you run a limited company alongside a full-time job?
Yes. There is no legal bar on being a director of your own company while employed elsewhere, provided your employment contract does not prohibit it. Your salary from the job uses your personal allowance, so a side company usually pays no director's salary and profits are taken as dividends taxed on top of your employment income, with a Self Assessment return each year.
4. Claim what the company can claim
Costs before and after incorporation, equipment, vehicles, travel and small tax-free benefits, with the record-keeping each one needs.
Pre-trading expenses: claiming costs incurred before incorporation
A company can deduct qualifying expenses incurred up to seven years before it started trading, treating them as if they were incurred on the first day of trade. Costs you paid personally before incorporation can be reimbursed by the company and claimed, provided they would have been allowable had the company paid them. For VAT, you can reclaim on services from the six months before registration and on goods still held from the four years before.
Limited company guideWorking from home: the use-of-home allowance for directors
A director working from home can be paid £6 a week (£26 a month) by the company with no evidence and no tax charge. A proportional claim based on floor area and hours of business use can be worth more, but it needs a calculation and supporting bills. A formal licence agreement charging the company rent is a third route: the rent is deductible for the company but taxable property income for the director.
Limited company guideClaiming phones, laptops and software through your company
One mobile phone per director or employee, with the contract in the company's name, is exempt from tax even with unlimited private use. Laptops and equipment bought by the company for business use with only incidental private use carry no benefit charge and attract capital allowances or a direct deduction. A phone contract in your own name paid by the company is taxable earnings, which is why the contract holder matters more than who uses the phone.
Limited company guideAnnual Investment Allowance and full expensing for small companies
The Annual Investment Allowance gives a 100% deduction on up to £1m of qualifying plant and machinery a year, covering new and second-hand assets and most integral features. Full expensing gives an unlimited 100% first-year deduction, but only to companies buying new and unused main-rate plant and machinery. For a small company spending under £1m the AIA usually does everything full expensing would.
Limited company guideCompany cars vs personal cars: mileage, benefit in kind and electric vehicles
Putting a petrol or diesel car through a limited company usually costs more in benefit-in-kind tax than it saves in corporation tax, so most directors use their own car and claim 45p a mile for the first 10,000 business miles and 25p after that. Electric cars are the exception: low appropriate percentages, full first-year allowances on new vehicles and no fuel benefit make company ownership genuinely efficient.
Limited company guideBusiness travel and subsistence rules for directors
Travel from home to a temporary workplace, and between workplaces, is business travel and can be paid or reimbursed tax free. Travel to a permanent workplace is ordinary commuting and is not. A workplace becomes permanent once you expect to attend it for more than 24 months and for more than 40% of your working time, and the relief stops from the point the expectation changes, not when the 24 months ends.
Limited company guideTrivial benefits, staff parties and tax-free director perks
A benefit costing £50 or less, that is not cash or a cash voucher, not a reward for work and not contractual, is exempt from tax. Directors of close companies are capped at £300 of trivial benefits a year. Separately, annual staff functions costing up to £150 a head in total across the year are exempt, provided the event is annual and open to all employees.
5. Fund the company and hire
Investment, reliefs and your first employee, plus keeping company money separate from your own as the numbers get bigger.
Start Up Loans and other government funding options
The government-backed Start Up Loan is a personal loan of £500 to £25,000 per founder at a fixed 6% a year over one to five years, with free mentoring, available to businesses trading under three years. Grants from Innovate UK and local growth hubs are non-repayable but competitive and usually match-funded. Regional growth hubs and the British Business Bank finance hub are the practical places to find what applies to your sector and area.
Limited company guideHiring your first employee: payroll, pensions and right to work
Before the first payday you must register as an employer with HMRC, carry out a right to work check, issue a written statement of employment particulars on or before day one, and take out employers' liability insurance. From the first pay run you report under RTI, apply auto-enrolment duties, and pay employer National Insurance at 15% on earnings above the £5,000 secondary threshold, offset by the Employment Allowance if you are eligible.
Limited company guideKeeping personal and company money separate: why it matters
A limited company is a separate legal person and its bank balance belongs to the company, not to the directors. Money taken out is salary, a dividend from distributable profits, a reimbursed expense or a loan — nothing else. Mixing personal and company spending creates an overdrawn director's loan account, section 455 tax at 35.75%, benefit-in-kind charges and, in an insolvency, personal claims from a liquidator.
6. Change the structure or close it down
Moving a sole trader business across, changing who owns and runs the company, and the two ways to close.
Transferring a sole trader business into a limited company
Incorporating a sole trader business means transferring the trade and its assets to a new company, usually in exchange for shares. The sole trade ceases for tax on the transfer date, the company starts a new corporation tax period, and assets pass at market value. Incorporation relief can defer any capital gain where the whole business, other than cash, is transferred as a going concern in exchange for shares.
Limited company guideAdding or removing directors and shareholders
Appointing a director requires their consent, an entry in the company's register and form AP01 filed within 14 days; the new director must also be identity verified at Companies House. Removing one uses form TM01 within 14 days, plus the correct internal process under the articles or the Companies Act. Share changes are different: a transfer needs a stock transfer form and possibly stamp duty, while new shares need an allotment return within one month.
Limited company guideStriking off a limited company: the DS01 process and its pitfalls
A solvent company with no remaining liabilities can apply to be struck off using form DS01 for a £33 online fee. The company must not have traded, changed name or disposed of trading assets in the previous three months, must not be subject to insolvency proceedings, and must tell HMRC, employees, creditors and shareholders within seven days of applying. Any assets left in the company at dissolution pass to the Crown.
Limited company guideMembers' Voluntary Liquidation and Business Asset Disposal Relief
A members' voluntary liquidation is the solvent way to close a company and distribute reserves as capital rather than income. It is worth the liquidator's fee where reserves exceed roughly £25,000, because Business Asset Disposal Relief can reduce the capital gains tax rate to 18% on up to £1m of qualifying lifetime gains, compared with dividend rates of up to 39.35%.
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