How to Set Up a Limited Company in the UK (2026 Step-by-Step Guide)

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Last updated: May 2026

Setting up a limited company in the UK is simpler than most people think — but choosing the right business structure is an important decision that shouldn’t be taken lightly.

There are four main types of business structure in the UK: sole trader, partnership, limited liability partnership (LLP), and limited company. As of 2026, there are over 5 million limited companies registered with Companies House, making it one of the most popular options for business owners.

In this step-by-step guide, we’ll show you exactly how to set up a limited company, including what you need, how much it costs, and what to do after registration.

Whether you’re switching from self-employment or starting a new business, this guide covers everything you need for 2026/27. And if you need support at any stage, our team is here to help.

What is a limited company?

A limited company is a type of business structure that is particularly different to a sole trader or partnership because the company is considered to be its own separate legal entity. This means that the company can hold its own and dispose of its own assets, as well as apply for loans and accrue debts, which are separate from those who run the company. What’s more, it’s different to the other two business structures because limited companies benefit from limited liability, which means that those who own the company (the shareholders) are only legally responsible for the company’s debts up to the value of its shares (the amount of money already invested into the company). Shareholders are not personally responsible for the business’s financial losses, unlike for sole traders or partnerships.   

Why set up a limited company?

Many people consider setting up a limited company as their income grows or their business becomes more established. While the right time will depend on your circumstances, there are some common situations where switching from self-employment to a limited company starts to make sense.

Common scenarios include:

• Your profits are increasing
  As your earnings grow, you may start looking for more tax-efficient ways to take income compared to being taxed solely as a sole trader.
• You want to limit personal risk
  A limited company is a separate legal entity, meaning your personal finances are usually protected if the business faces financial difficulties.
• You’re working with larger clients or contracts
  Some clients, agencies, or industries prefer working with limited companies, particularly for higher-value or long-term contracts.
• You want to present a more professional image
  Operating as a limited company can enhance your credibility and make your business appear more established.
• You’re planning to grow or scale the business
  A limited company structure is often better suited if you plan to hire employees, bring in partners, or expand operations.
• You want a clearer separation between personal and business finances Running a company helps formalise your finances, making it easier to manage income, expenses, and long-term planning.

What are the advantages of running a business as a limited company?

There are several advantages of setting up a limited company, particularly as your business grows and becomes more profitable. From legal protection to potential tax savings, the benefits of setting up a limited company can make it a more suitable structure than operating as a sole trader.

Key advantages include:

• Limited liability protection:
  One of the main benefits of setting up a limited company is that it is a separate legal entity. This means that, as a director or shareholder, you are not usually personally responsible for the company’s debts. Creditors are therefore only able to seize assets from the company, but not from you personally (such as your car or your home) unless you have secured a loan against your personal assets.
• Tax efficiency:
  One of the key tax advantages of setting up a limited company is how profits are taxed. Limited companies pay Corporation Tax, which for the current 2026 tax year is 25% for the main rate and 19% for the small profit rate if profits are under £50,000. If between the two rates, you may be eligible for marginal relief.
  This does not seem like a significant saving if you compare it to the basic income tax rate of 20%, however, savings become considerable when compared to the higher rate income tax (40%) or additional rate income tax (45%).
• Flexible income options:
  As a company director, you can choose how to take income, typically through a combination of salary and dividends. Dividends are taxed at lower rates than salaries, and you can make use of the £500 dividend allowance.
• Ability to retain profits in the business:
  There are far greater tax-saving opportunities when operating your business as a limited company than when compared to a sole trader or partnership; this is because you have the ability to choose whether you want to keep the profits within the company to further invest and grow the business or extract profits for your own personal use.
• Greater flexibility with ownership:
  A limited company allows you to divide ownership through shares. This can make it easier to bring in business partners, family members, or investors.
• Improved access to funding:
  Limited companies are often seen as more established, which can make it easier to secure loans, attract investment, or raise capital.
• Enhanced credibility:
  Operating as a limited company can improve your professional image, helping to build trust with clients, suppliers, and lenders.
• Easier to sell or exit the business:
  A limited company is a separate asset that can be sold, either partially or in full, making succession or exit planning more straightforward.

What are the disadvantages of running a business as a limited company?

• Public disclosure of company information: A limited company must be registered with Companies House, which is publicly accessible. This means certain details are visible, including your name, role as a director, date of birth, nationality, and company address (which may be your home address if used as the registered office). 
• Higher setup and running costs: Setting up and maintaining a limited company is generally more expensive than operating as a sole trader or partnership, due to incorporation fees, accounting costs, and ongoing compliance. 
• Increased administrative responsibilities:
• Limited companies must keep statutory records and file annual accounts, confirmation statements, and tax returns with Companies House and HMRC. 
• Strict filing deadlines and penalties: There are multiple different deadlines that you must adhere to for administrative filing when you are a limited company, which can result in fines if you are late.
• Less tax efficient at lower income levels: It can be less beneficial to run your business as a limited company if your earnings are within the basic rate income threshold, because the company will be charged corporation tax on its profits, and then you will be charged income tax on any money withdrawn from the company for personal use, either through salary or dividends.
• More complex closure process: There are more fees to pay, as well as formal procedures to follow if you want to close down a limited company.
• Potential audit requirements: Limited companies are required to complete audited accounts once they reach the audit threshold, however sole traders and partnerships are exempt from this.

Accounting fees: If you require help from an accountant to complete your tax and accounting duties, then you should bear in mind that these fees are likely to be higher for a limited company than for a sole trader or partnership.

Who can set up a limited company?

In the UK, almost anyone can set up a limited company.

• Be at least 16 years old
• Have at least one director and one shareholder (these can be the same person)
• Have a registered UK office address
• Choose a company name that is unique and not too similar to an existing business

You do not need to be a UK resident to set up a limited company, although there may be additional tax considerations if you live abroad. However, certain individuals cannot act as directors — for example, if you are an undischarged bankrupt or have been disqualified.

What do you need to set up a limited company?

To set up a limited company in the UK, you will need to provide certain information and documents during the registration process with Companies House.

The main documents and information needed to set up a limited company include:

• A unique company name
• A registered office address
• Details of directors and shareholders
• A share structure
• A SIC code (which identifies your business activity)
• A memorandum of association
• Articles of association

You will also need personal details for all directors and shareholders, including names, dates of birth, nationalities, occupations, and service addresses.

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

The cost of setting up a limited company in the UK will depend on how you choose to register the business. If you register directly online with Companies House, the incorporation fee is currently £100. If you apply by post, the fee is £124.

You may also have additional costs if you choose to use an accountant, solicitor, or company formation agent to help with the setup process.

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

If you register a limited company online with Companies House, your application is usually approved within 24 hours. However, delays can happen if additional checks or clarification are required. If you apply by post, registration will typically take around 8–10 days once Companies House has received your application.

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

If you register a limited company online with Companies House, your application is usually approved within 24 hours. However, delays can happen if additional checks or clarification are required. If you apply by post, registration will typically take around 8–10 days once Companies House has received your application.

Step-by-step on how to set up a limited company in the UK

Decide on a company name

Your limited company needs its own identity, which will be a unique name of your choosing. It must not be too similar to an existing company on the Companies House register. It must also comply with naming rules, meaning it cannot be offensive or include restricted words. All limited company names must also end in either “Limited” or “Ltd”, unless they are exempt (for example, certain charities).

Have at least one director who will be responsible for the company

Every limited company must have at least one director. This is the person legally responsible for running the company and ensuring its obligations are met.

You can appoint more than one director if needed, and directors can be added either during setup or after incorporation.

Appoint a company secretary if you would like to

It is no longer a legal requirement for private limited companies to appoint a company secretary. Since 2008, this role has been optional unless it is specifically required by the company’s articles of association. Most small companies choose not to appoint one at the point of incorporation, although one can be added later if needed.

Determine your share capital and shareholders

Shares in a company determine ownership, and all limited companies must have at least one shareholder. A director can also be a shareholder, and you can have as many shareholders as you wish.

The total number of shares and their value make up the company’s share capital. This can be set at any level and represents the initial ownership structure of the business.

For example, a company may issue 10,000 shares at £0.01 each, giving a total share capital of £100. This £100 is typically paid into the company’s bank account once it has been set up.

In most cases, one share equals one vote. Any shareholder holding at least 25% of the company’s shares is usually considered a person of significant control.

To keep things simple at the start, most companies issue ordinary shares, which give shareholders the right to vote, receive dividends, and receive any remaining assets if the company is closed. Other classes of shares can be created later if required. You may also choose to make a spouse or partner a shareholder in order to make use of their dividend allowance, depending on your personal tax planning position.

Collate your company documents

The company formation process requires you to submit certain documents and information to Companies House.

These include:

• Memorandum of Association
  A signed legal statement from all shareholders confirming their agreement to form the company.
• Articles of association
  These are the rules that govern how the company will be run, agreed by the shareholders and directors. You can use standard model articles or create your own tailored version.
• Form IN01
  This is the main incorporation form and includes key company details such as:
  • Company name
  • Trading activities (SIC code)
  • Registered office address
  • Details of directors and company officers
  • Share capital and how it is divided between shareholders
  • Persons of significant control

Register with Companies House and HMRC

The final step is to register all the information with Companies House. The easiest way to complete this is by setting up your limited company online through the Companies House registration service.You can also register for Corporation Tax with HMRC at the same time. If you get stuck, you can choose to get help from a solicitor, accountant, or company formation agent.

What to do after setting up a limited company

Once you have registered your company with Companies House, there are still several important steps to take to ensure your business runs correctly and remains compliant.

After incorporation, you will receive your certificate of incorporation, which confirms your company number and official date of formation. At this point, you are legally able to start trading. If you are not ready to begin trading immediately, you can choose to make your company dormant by contacting HMRC once you have received your Unique Taxpayer Reference (UTR).

However, there are still several ongoing responsibilities and setup steps to consider:

• Keep accurate company records
  This is a legal requirement. You must maintain proper accounting and company records, as failure to do so can result in penalties or disqualification as a director.
• Set up a business bank account  If you are trading, you are strongly advised to have a business bank account so that your business and personal finances are kept separate. This helps make it much easier to manage records, file accounts, and stay compliant with HMRC requirements. 
• Arrange appropriate business insurance
  Depending on your business type, you may need specific cover. For example, employers’ liability insurance is legally required if you employ staff (with some limited exceptions).
• Set up PAYE if you pay yourself a salary
  If you intend to take a director’s salary, you will need to register a PAYE scheme with HMRC. This may also involve paying National Insurance, depending on your earnings.
• Consider VAT registration
  VAT registration becomes mandatory once your taxable turnover exceeds £90,000, but many businesses choose to register voluntarily depending on their circumstances.
• File tax returns and annual accounts
  Your first Corporation Tax return is usually due 12 months after the end of your accounting period. Your first annual accounts must also be filed with Companies House, typically within 21 months of incorporation.
• Meet ongoing compliance requirements
  This includes filing your confirmation statement, maintaining statutory records, and meeting all Companies House and HMRC deadlines.

Get help with setting up a new limited company in the UK

If you’re looking for additional support for your new limited company beyond simply incorporation, then choosing Ridgefield Consulting, Oxford accountants, can be the ideal solution that helps you with bookkeeping, corporation tax and annual accounts filing. Get in touch by using our contact form to see how we can create a tailored service for getting you set up. 

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