Setting up a limited company (Ltd) is one of the most popular choices for entrepreneurs, freelancers and small business owners in the UK. Limited liability, tax planning options and a more established image all make it attractive — hundreds of thousands of new companies are registered every year.
In this guide we cover why you might choose a limited company, how to register step by step, what it costs, what you must do after registration, and the mistakes to avoid.
Why set up a limited company?
Limited liability
The company is a separate legal person. In most cases your personal assets, such as your home and savings, are protected if the company has debts — unlike a sole trader, who is personally liable. (Personal guarantees and wrongful trading are exceptions.)
Tax planning
Companies pay Corporation Tax at 19% to 25% on profits, compared with Income Tax of 20% to 45% for sole traders. You can also plan how you take money out — salary, dividends and pension contributions — although dividends are taxed too (10.75% basic rate from April 2026), so the savings depend on your circumstances.
Credibility
Having “Ltd” after your name shows you have set your business up properly. Some larger clients and agencies will only work with limited companies.
Easier access to finance
Investors can buy shares in a company, and some lenders prefer dealing with incorporated businesses.
How to set up a limited company
1. Choose your company name
Your name must be unique and usually end in “Limited” or “Ltd”. Check the Companies House register to make sure it is available and avoid sensitive words that need approval. While you are at it, check the matching website domain and social media names.
2. Appoint directors and shareholders
Every private limited company needs at least one director (an individual aged 16 or over) and at least one shareholder. In many small businesses the director and the shareholder are the same person. A company secretary has been optional for private companies since April 2008.
3. Verify your identity with Companies House
Since 18 November 2025, every new director and person with significant control (PSC) must verify their identity with Companies House — either through GOV.UK One Login or through an Authorised Corporate Service Provider (ACSP). You receive a personal code that is used when the company is formed. Existing directors must verify by their company’s next confirmation statement.
4. Prepare your key documents
Every company needs a memorandum of association (confirming who is forming the company) and articles of association (the company’s rulebook). If you register online, standard versions are created for you — but read them, especially if there is more than one shareholder.
5. Register with Companies House
You will need:
- Your company name and a UK registered office address.
- A registered email address (not shown publicly).
- Details of directors, shareholders and PSCs, with their identity verification codes.
- A SIC code describing what the business does.
- A statement that the company is being formed for a lawful purpose.
From 1 February 2026 Companies House charges £100 to incorporate online (usually within 24 hours) and £124 by post (which takes much longer). Once approved you receive your certificate of incorporation.
What does it cost?
- Companies House registration: £100 online or £124 by post.
- Formation or accountant’s set-up fee, if you use one — Ola Accountancy sets up a new company for £200 + VAT.
- Business bank account: often free to around £25 a month, depending on the provider.
- Confirmation statement: £50 a year if filed online.
- Accountancy: annual accounts, Corporation Tax return and bookkeeping — see our prices page for fixed fees.
After registration
- Register for Corporation Tax within three months of starting to trade.
- Open a business bank account and keep business and personal money separate.
- Register for VAT if your taxable turnover goes over £90,000 in any rolling 12-month period (or earlier voluntarily, if it helps you).
- Register as an employer for PAYE before your first payday, including if you pay yourself a salary.
- File your confirmation statement every year and your annual accounts within 9 months of your company’s year end.
Common mistakes to avoid
- Choosing a name that is too similar to an existing company or uses restricted words.
- Mixing personal and business money — it causes director’s loan problems and HMRC questions.
- Forgetting deadlines: late accounts attract automatic Companies House penalties.
- Poor records: companies must keep accounting records for at least 6 years.
Let Ola Accountancy handle it
Setting up the company is the first step; running it properly is where the work is. We can form your company, verify directors’ identities, register you for Corporation Tax, VAT and PAYE, and then take care of your accounts, tax returns and filings so you never face penalties — leaving you free to grow the business.
This article is general information based on the rules in force on 30 September 2026. It is not personal tax advice — tax rules change and the right answer depends on your circumstances, so please speak to us before acting on it.
