How to set up a limited company in 2026

By PaySlipCheck Editorial · 23 May 2026 · 9 min read

Forming a UK limited company is a same-day process at Companies House — £50 online via gov.uk, takes about 24 hours to get your incorporation certificate. But the full operational setup that lets you actually trade properly under the new entity name takes 1-2 weeks: business bank account, Corporation Tax registration with HMRC, PAYE setup if you're paying yourself a director salary, accountancy arrangement, and notifying clients. The ten steps below walk through the whole process in the order they need to happen, with rough timelines and the key decisions at each stage.

Verified against 5 official sources · Last reviewed 23 May 2026
On this page
  1. The ten steps in order
  2. After incorporation — ongoing obligations
  3. Common formation mistakes
  4. Cost summary
  5. In short

The ten steps in order

Forming a limited company is a sequenced process — each step usually depends on the previous one completing. The full timeline from "I've decided to form" to "I can fully invoice and operate compliantly" is 1-2 weeks. Day-by-day:

Step 1 — Confirm the company name is available

Names must be:

  • Unique on the Companies House register
  • Not "too similar" to existing names
  • Not containing restricted words (Bank, Royal, Trust, etc.) without specific permission
  • Ending in "Limited", "Ltd", "Cyfyngedig" or "Cyf"

Check availability at the Companies House name search. If the name you want is taken or similar to an existing one, you'll need an alternative.

Quick tips: - Sole-name companies ("John Smith Ltd") are common for one-person contractors - Made-up names ("Acme Ventures Ltd") are fine but check trademark too - Avoid anything that implies regulated activity (financial advice, medical, legal) unless you're actually regulated

Step 2 — Decide on the registered office address

This is the legal address Companies House sends statutory mail to. Options:

  • Your home address: free, but it goes on the public Companies House register
  • Your accountant's address: often included in accountancy packages
  • A registered office service: £25-£75/year, keeps home address private
  • A virtual office: typically £15-£40/month, includes mail forwarding

For most contractors, the registered office service or accountant's address is the standard call — keeps your home address out of the public record without adding significant cost.

Step 3 — Choose your SIC code

The five-digit Standard Industrial Classification code describes your main activity. Common codes for contractors and consultants:

SIC code Activity
62012 Business and domestic software development
62020 Information technology consultancy
70229 Management consultancy activities (other)
74909 Other professional, scientific and technical activities
73110 Advertising agencies
74100 Specialised design activities
74201 Portrait photographic activities

Pick the one that best describes your main income source. You can list up to four codes if you genuinely do multiple things, but most one-person Ltd companies only need one.

Step 4 — Decide on directors and shareholders

For a solo contractor Ltd:

  • You as the sole director: signs off filings, takes legal responsibility
  • You as the sole shareholder: owns the company, receives dividends
  • Typically issue 100 ordinary shares at £1 each, all held by you

If you're bringing in a partner, the share split happens here — 50:50 for equal partners, or whatever ratio reflects the agreement. Get legal advice if the share structure involves anyone outside your immediate household.

Step 5 — Register with Companies House

Go to gov.uk/set-up-limited-company. Process:

  1. Fill in the company name, address, director details, share information
  2. Pay the £50 fee online (or £71 if you post the IN01 form)
  3. Receive your incorporation certificate by email — usually within 24 hours

You're now a registered UK company. The company has a Companies House number (the 8-digit identifier you'll need for everything else).

Formation services do the same thing but bundle it with extras (registered office, mail forwarding, sometimes an accountant intro). They charge £30-£150 on top of the Companies House fee.

Step 6 — Open a business bank account

Limited company finances must be separated from personal finances — HMRC requires it and your accountant will need it.

Common UK business bank accounts for contractors and one-person Ltd companies:

  • Tide — free tier, app-based, fast onboarding
  • Starling Business — free, full UK banking, popular with contractors
  • Revolut Business — free tier, good for international invoicing
  • Mettle (NatWest) — free, often bundled with FreeAgent accounting

Application takes 1-3 working days at fintech banks; 1-2 weeks at high street banks. You'll need your Companies House certificate and personal ID.

Step 7 — Register with HMRC for Corporation Tax

You must register for Corporation Tax with HMRC within 3 months of starting to trade (not 3 months of incorporation — if you're not yet invoicing, you have more time).

Process: 1. Use the Government Gateway login 2. Provide your company's UTR (Unique Taxpayer Reference) — HMRC sends this by post within ~10 working days of incorporation 3. Tell HMRC your accounting reference date (usually the end of the month you incorporated in)

Once registered, HMRC sets up your CT600 filing schedule.

Step 8 — Engage an accountant

For most one-person Ltd companies, an accountant pays for themselves through tax-efficient salary/dividend planning and avoided mistakes on filings.

Options:

  • Contractor accountant packages: monthly subscription (£80-£150), covers everything — annual accounts, CT600, payroll, Self Assessment
  • Traditional accountant: usually higher fees but more personalised
  • DIY: feasible if you're financially literate, but Corporation Tax filings get unforgiving fast

Most contractors choose a specialist contractor accountant package. Common providers in the UK include Crunch, SJD Accountancy, Brookson, and many smaller regional firms.

Step 9 — Set up PAYE for your director's salary

If you plan to pay yourself a director's salary (the standard contractor pattern is to pay yourself the £12,570 personal allowance), you need to register the company as an employer with HMRC.

Process: 1. Register for PAYE via your Government Gateway account (your accountant usually handles this) 2. Set up Real Time Information (RTI) submissions — your accountant or payroll software does this monthly 3. First salary payment can then run

You don't strictly need PAYE if you're only paying yourself dividends — but the £12,570 salary is normally worth taking because it uses your personal allowance and counts as a "qualifying year" for State Pension.

Step 10 — Notify clients and start invoicing under the new entity

Once you have: - Companies House certificate - Business bank account - Corporation Tax registration confirmed

…you can issue invoices under the new Ltd name. Tell existing clients your new entity name and bank details. If you were previously trading as a sole trader, the transition usually happens at a clean cutover date (often the start of a new month).

Update: - Your client contracts (the contracting party is now the Ltd, not you personally) - Your invoice templates with the Ltd name, Companies House number, and registered office - Your email signature if relevant - Any professional indemnity / liability insurance to name the Ltd as the insured party

After incorporation — ongoing obligations

The work doesn't stop after formation. Annual obligations include:

  • Confirmation statement: one-page form to Companies House, £34/year — confirms key info hasn't changed
  • Annual accounts: filed with Companies House, prepared by your accountant
  • Corporation Tax return (CT600): filed with HMRC within 12 months of year-end
  • Self Assessment: your personal return covering dividends and salary
  • Monthly RTI: PAYE submissions if you're on payroll
  • VAT returns: quarterly if you're registered (mandatory above £90,000 turnover)

A good contractor accountant handles all of the above. Your job becomes bookkeeping (logging invoices and expenses) and sense-checking that your accountant has what they need.

Common formation mistakes

  • Trading before formation: any income earned before the company is incorporated belongs to you personally, not the company. Time the cutover carefully
  • Wrong share structure: defaulting to a complex share class structure when ordinary shares are fine — keep it simple unless you have a specific reason not to
  • No accountant: trying to do CT600 yourself in year one. The accountant pays for themselves through avoided mistakes
  • Mixed finances: paying business expenses from a personal account or vice versa. HMRC penalises this in audit and your accountant will charge extra to clean it up
  • Forgetting to register for Corporation Tax: HMRC will eventually catch up but the penalties stack — register within the 3-month window

Cost summary

One-time costs Approximate range
Companies House registration £50
Formation service (optional) £30-£150
Initial registered office service (annual) £25-£75
Initial accountancy setup £0-£200
Annual ongoing costs Approximate range
Accountancy package £900-£1,800
Confirmation statement £34
Business bank account £0-£120 (most free)
Professional indemnity insurance £150-£500
IR35 insurance (if relevant) £100-£300
Total annual £1,200-£2,800

The £1,500 mid-point is what you're saving in tax above ~£40,000 profit, which is the threshold most "should I" articles cite.

In short

Forming a limited company is administratively manageable — £50 to Companies House, a same-day registration, 1-2 weeks of operational setup. The decision of whether to form is the harder part; see should I start a limited company for that decision framework, and sole trader vs limited company for the take-home numbers.

Once you've decided yes, the steps above complete in under two weeks of focused effort.

Frequently asked questions

How much does it cost to set up a limited company in the UK?

The Companies House registration itself costs £50 online (or £71 by post). On top, you'll typically pay £25-£75 for a registered office service if you don't want to use your home address, plus annual costs: £34 confirmation statement, £900-£1,800 accountancy fees, £150-£500 professional indemnity insurance, business bank account (usually free for contractors).

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

The Companies House registration itself takes about 24 hours when done online. The full operational setup including business bank account, Corporation Tax registration, accountant, and (if needed) PAYE typically takes 1-2 weeks. You can start invoicing as soon as you have the company incorporation certificate, but you'll need the business bank account and Corporation Tax registration in place before you can fully operate compliantly.

Do I need to use a formation service or can I do it myself?

You can register directly with Companies House for £50 — the process is straightforward. Formation services typically charge £30-£150 on top of the Companies House fee, in exchange for bundling the registration with extras like registered office addresses, Companies House mail forwarding, and sometimes a basic accountant introduction. For people who want a one-stop setup, formation services save time; for people comfortable with the gov.uk process, DIY is fine.

What's a SIC code and how do I choose one?

SIC = Standard Industrial Classification. It's a five-digit code that describes what your company does. You pick from the full list at gov.uk's SIC list. Common contractor codes include 62012 (Business and domestic software development), 70229 (Management consultancy activities), 74909 (Other professional, scientific and technical activities). You can list up to four SIC codes; pick the one that best describes your main activity.

Do I need a separate registered office address?

Legally, you need a registered office — but it doesn't have to be where you actually work. It just needs to be a UK address where Companies House and HMRC can send statutory mail. Many directors use their home address; others use a registered office service (£25-£75/year) to keep their home address off the public Companies House register. Anything sent to the registered office is treated as legally served on the company.

What's the difference between ordinary and preference shares?

For a one-person company, you almost always issue ordinary shares — typically 100 shares at £1 each, all held by you. Preference shares give the holder priority for dividends (and on liquidation) but with no voting rights — useful for bringing in investors but unnecessary for solo contractors. Stick with ordinary shares unless your accountant advises otherwise for a specific reason.

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Glossary terms used on this page

Quick definitions for the key terms above.

  • PAYE — The UK system through which employers deduct Income Tax and National Insurance from employees' pay before paying it to them.
  • Personal allowance — The amount you can earn each tax year before paying any UK Income Tax — £12,570 in 2026/27, frozen until April 2031.

Sources

All figures on this page are sourced from official UK government publications. We don't cite secondary commentary or other calculator sites.

  1. GOV.UK — Set up a limited company: step by step
  2. GOV.UK — Choose a company name
  3. Companies House — Register your company
  4. HMRC — Register for Corporation Tax
  5. GOV.UK — Standard Industrial Classification codes

For the calculation methodology behind every figure on this page, see our methodology. For our review and update process, see our editorial standards.

Last reviewed: 23 May 2026. Next review due 23 November 2026.

Disclaimer: This page provides general information based on published HMRC and gov.scot figures. It is not personal tax or financial advice. For your specific situation, please consult a qualified accountant or contact HMRC directly.